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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Joining

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Speaker 1: us now, I'm pleased to say, joining us through the

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Speaker 1: quarter as well to really keeps us up to speed

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Speaker 1: on what's been happening with volatility is Ding Kern at

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Speaker 1: Macro Risk Advice is founder and CEO. Joins us Now, Dean,

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Speaker 1: what a quarter it's been for vol We have the

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Speaker 1: technical vol shock of a month ago, and we still

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Speaker 1: seem to be trying to clear that shock of a

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Speaker 1: month ago. Why, Dean, Yeah, I think that's a That's

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Speaker 1: a great way to frame it, is that this inverse

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Speaker 1: vis meltdown that occurred right at the beginning of Februar

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Speaker 1: worry has come and gone. That trade is de de

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Speaker 1: leveraged UH and so you've still got a tremendous amount

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Speaker 1: of a volatility UH inequity markets specifically UM and it's

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Speaker 1: just so much different than two thousand and seventeen. So

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Speaker 1: it's telling you that there's just a lot of tension.

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Speaker 1: I I would frame it as follows, Um, you talked

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Speaker 1: about bond yields just before UM, so, so you've got

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Speaker 1: bond prices rallying as stock prices are now faltering a

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Speaker 1: little bit. But in the in the days before the

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Speaker 1: inverse vix unwind UM, one of the sources of instability

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Speaker 1: was rising bond yields. Remember the days before the x

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Speaker 1: I v U imploded. You had a couple of sessions

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Speaker 1: in which bond yields went up a lot, and folks

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Speaker 1: were getting very, very worried about inflation the Fed's response,

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Speaker 1: and that was destabilizing for stock prices. So all in all,

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Speaker 1: you have a situation where um movements in bond prices

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Speaker 1: either to the high side or the low side seemed

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Speaker 1: to be uh not a good thing uh for for equities.

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Speaker 1: And when one of our core tenants at Macro Risk

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Speaker 1: Advisors has been that the equity market is is basically

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Speaker 1: short volatility on the bond market. If you if you

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Speaker 1: have a situation in which bond bond yields are stable, UM,

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Speaker 1: that's probably good for risk assets. It suggests a uh

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Speaker 1: an environment in which you can take risk. But if

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Speaker 1: UM either there's too much growth or too little growth,

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Speaker 1: equity markets have in trouble digesting it. Dane, There's a

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Speaker 1: really interesting thing happening though, that the equity voul has

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Speaker 1: has remained isolated to equity vol It hasn't led out

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Speaker 1: into other asset classes. Now, I would have expected one

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Speaker 1: of two things to happen, for it to either bleed

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Speaker 1: or settle down UM, neither of which has happened. So

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Speaker 1: so how is this going to evolve in the come

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Speaker 1: in months? As you see things plan out right, It's

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Speaker 1: a great point that it's this is a incredibly US

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Speaker 1: centric risk environment. So if you look at all the

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Speaker 1: cross asset corollarias, whether it's fex vol or if you

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Speaker 1: even look at UM certain spread relationships, look at SMP

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Speaker 1: volatility versus eurostocks implied volatility, there's actually a premium for

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Speaker 1: and P. It's very rare to have this happen. So,

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Speaker 1: as you know, very US equity centric. UM it can

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Speaker 1: settle down. Uh, you know, if if the daily moves

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Speaker 1: in the SMP start to settle down, then the VIX

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Speaker 1: is gonna come down. Those those two things are gonna

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Speaker 1: act in tandem. UM on a on a less optimistic note,

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Speaker 1: you could say that um, the old adage when the

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Speaker 1: US catches a cold, uh, when when the US, the

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Speaker 1: rest of the world catches the cult. So if you're

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Speaker 1: seeing something UM start in the US as a as

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Speaker 1: a lack of stability, it tends to at least potentially

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Speaker 1: broadened to other asset classes. In geography, does a guy

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Speaker 1: like you game gauge judge the distance of the dots

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Speaker 1: from the market, the FED dots? Yeah, yeah, I think

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Speaker 1: it's important. I think is it moving right now? Because

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Speaker 1: to me, John Farrell helped me here because John Farrell

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Speaker 1: is the star of the TV show The Real Will

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Speaker 1: we see that he's plugging my Bond show. You will

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Speaker 1: see it like today, you will see it. Demeandbers so great.

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Speaker 1: They shift from Friday to Thursday. They did that. But

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Speaker 1: the fact of the matter is the debate shifted the

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Speaker 1: last two weeks. Yeah, and so I think back to

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Speaker 1: the sort of FED dots and the FED response UM

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Speaker 1: and it's and and to the recent sort of counter

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Speaker 1: trend rally in the In the tenure, UH, you have

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Speaker 1: this scenario in which folks were worried that, uh, the

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Speaker 1: inflation was moving too quickly and that the market was

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Speaker 1: sort of trying to adjust to an environment where the

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Speaker 1: feds rhetoric would change. UM. I personally thought Powell was

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Speaker 1: was masterful in his non answers, which is what the

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Speaker 1: FED is, which was surprising because we thought he might

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Speaker 1: not bake it was. It was a an old pro uh.

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Speaker 1: You know, if you look back at Bernanke's first press conference,

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Speaker 1: a couple of them and and saying with yelling. They

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Speaker 1: were not as skilled at saying nothing yell and learned

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Speaker 1: to say nothing over time. But Pale did a very

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Speaker 1: good job. And uh. The the recent inflation data has cooperated,

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Speaker 1: and I think this is where I would say the

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Speaker 1: market is especially vulnerable right now is we have a

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Speaker 1: small reprieve from the worry about higher bond yields and

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Speaker 1: higher inflation because we got an NFP where non farm payrolls,

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Speaker 1: where wage growth was uh more contained, and then the

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Speaker 1: cp I was also a market friendly number. Um. If

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Speaker 1: those return as market worries, given some of the other

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Speaker 1: sources of of concern, I think this is gonna be

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Speaker 1: challenging because John one of the great themes of a

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Speaker 1: Thursday before we you know, do our reading through the

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Speaker 1: week show and John, even though you're in America, are

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Speaker 1: you off Monday because you're British together together we are? Um, yeah, whatever,

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Speaker 1: But anyways, John, seriously, we're within the range. We're not

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Speaker 1: out of the range. On the tenure. We did break

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Speaker 1: out of the range just in the last couple of days,

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Speaker 1: and I thought it was interesting that we broke out

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Speaker 1: to the downside and not to the upside. The other

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Speaker 1: thing I think that's really been interested about the quarter

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Speaker 1: that we've just had Dean, is that actually, despite the

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Speaker 1: Voal shock, people haven't taken out their expectations for hikes,

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Speaker 1: And that's what's really played into this flatty yield curve story,

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Speaker 1: because treasuries have acted as a shock absorber, but only

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Speaker 1: further down the curve in a ten year space, So

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Speaker 1: yields have come in, but a two year notice remained

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Speaker 1: really really rather rancord, and yields haven't come down at all.

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Speaker 1: No one is pricing out rate hikes despite the Voal shock,

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Speaker 1: So I guess we end up with a spread of

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Speaker 1: fifty basis points on two s tends. How much should

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Speaker 1: I read into that based on the fact that the

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Speaker 1: Voal shock and the idea that actually no one's removing

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Speaker 1: their rate high expectations. Yeah, so I think the two

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Speaker 1: S turns spread is something we should all be watching.

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Speaker 1: It's it's had a um correlation with future changes in

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Speaker 1: in economic growth and a looser correlation with stock prices.

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Speaker 1: But it's certainly something to to focus on. The feed

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Speaker 1: is is commenting on it itself. I'll tell you, I

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Speaker 1: look at the two S turns spread, at least for now,

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Speaker 1: is something that is has been a part of the

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Speaker 1: bullmarket story. In other words, the fetest tighten because it can.

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Speaker 1: And so here's what I would say. Actually, one of

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Speaker 1: to me, you know, Tommy asked me a lot about hedges. UM,

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Speaker 1: the vix is up at you know, north of twenty.

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Speaker 1: These hedges are not cheap right there. They're not only

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Speaker 1: they're they're difficult to carry. There's a lot of things

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Speaker 1: that you're fighting when you buy a put on the

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Speaker 1: equity optional. So what I would say is, and this

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Speaker 1: is again a focus for us, is trying to find

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Speaker 1: those hedges that carry better and have a couple of

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Speaker 1: different ways to win. And so here here's what I

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Speaker 1: would say. One of the things to really look at

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Speaker 1: is UM is the move index. So this is the

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Speaker 1: Merrill Lynch VIX UH index of of bond volatility. This

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Speaker 1: is retraced most of its increase from early February. UM.

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Speaker 1: These options are actually quite cheap, and so if you

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Speaker 1: want to real tail trade UH, you can buy essentially

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Speaker 1: a call option on two your bond prices. UM basically

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Speaker 1: saying things get so bad that the FED actually the

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Speaker 1: the FEDS timeline of tightening actually gets distrust. No one's

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Speaker 1: actually betting on that, right. And what you touch upon there,

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Speaker 1: which is so important is if you're going to do

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Speaker 1: a hedge, if you get protection, you have to pay

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Speaker 1: for it, and right now in so many areas that

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Speaker 1: really eats into potential total return, right And I would

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Speaker 1: say that this, this is what makes these risk transition

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Speaker 1: periods so difficult, is that, UM, there is a recency

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Speaker 1: bias that that everyone has. When you stare at a

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Speaker 1: VIX and you were staring at a ten VIS last year,

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Speaker 1: and you say, wow, how could I do it now?

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Speaker 1: How could I buy a hedge that's so much more

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Speaker 1: costly than it was? And so you get anchored to

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Speaker 1: what was instead of looking forward in terms of how

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Speaker 1: the risk environment is changing. Oh, very good, Dean CURNI

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Speaker 1: thank you so much. Macro Risk Advisors greatly appreciated. John

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Speaker 1: Faro and turnkey John. Why don't you bring in kept

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Speaker 1: the nearras of Aby Bernstein, who's in the business of courage,

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Speaker 1: which recently has been increased and needed. She's in the

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Speaker 1: business of time horizon. Kathy Fishing, I'm not I don't

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Speaker 1: have that because I'm in the triple leverage or cash yes,

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Speaker 1: which means nothing really matters to you. Just sit there,

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Speaker 1: Remind me again, what are you paying to be in

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Speaker 1: one basic Gathy is great to have you with us.

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Speaker 1: Talk to me about the importance of time and rising

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Speaker 1: for a really noisy quarter. How do you just look

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Speaker 1: through this and look ahead. I'm really glad you started

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Speaker 1: that way. Time horizon is clearly the most important thing

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Speaker 1: for anything when you look at your money in that

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Speaker 1: if you're going to spend in the short term, of course,

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Speaker 1: you've got to have your money very carefully, safely managed.

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Speaker 1: But when you go out five, ten, twenty years, which

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Speaker 1: really most people are managing their money for, that's when

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Speaker 1: you want to make sure you're taking enough risk. And

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Speaker 1: risk means you're going to have periods like now where

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Speaker 1: you have increased volatility. But even today we have to

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Speaker 1: remember volatility is coming back to more normal levels. It's

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Speaker 1: not shocking. We just had a ridiculously calm period in

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Speaker 1: two thousand and sixteen seventeen when volatility was abnormally low,

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Speaker 1: and now we're getting back to more realistic kinds of volatiles. So,

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Speaker 1: with markets swinging all over the place, when the clouds

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Speaker 1: start calling you up and saying, Kathy, I'm scared, what

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Speaker 1: are you saying back to them? Well, actually our clients

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Speaker 1: are not, because we've been talking about how low volatility

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Speaker 1: was and the fact that it is now more normal.

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Speaker 1: So you know, I think setting expectations and reminding the

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Speaker 1: way markets do work long run is the most important

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Speaker 1: thing for long term investors because there will be ups

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Speaker 1: and downs all the time, and this this period is unusual.

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Speaker 1: We've got a lot of change. We talked about rates,

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Speaker 1: we're talking about the risk of trade wars. Is something

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Speaker 1: no one would have thought we'd be talking about in

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Speaker 1: this in this day and age, when globalization has driven

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Speaker 1: the strong economy of the past twenty years. So these

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Speaker 1: are surprising events. Can I This came up earlier this

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Speaker 1: week and something Alliance Bernstein's famous for can I get

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Speaker 1: a globalization proxy by buying US multinationals or do I

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Speaker 1: have to go abroad to get that globalization? You still

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Speaker 1: need to buy overseas stocks because part of part of

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Speaker 1: the reason it's currency, right, you do want to have

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Speaker 1: currency exposure in your non U S stocks as opposed

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Speaker 1: to just buying multinational And obviously all companies are going

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Speaker 1: to hedge their currency risk as suits them, so you're

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Speaker 1: you're getting multiple ways of getting currency exposure. But we

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Speaker 1: would certainly argue very strongly you want to have stocks

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Speaker 1: that are domiciled in foreign countries and and listed on

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Speaker 1: different markets. And it's hugely different Kathy, and that a

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Speaker 1: few years ago you bought the telephone company and if

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Speaker 1: you were bold, you bought the concrete company that was

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Speaker 1: that was all international. And yeah, yeah, we've pushed clients

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Speaker 1: to tou to about a fort exposure to US for

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Speaker 1: zero for zero. As you know, the world the world

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Speaker 1: is is moving towards fifty, so that would still imply

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Speaker 1: and overweight to U S stocks. But certainly the world

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Speaker 1: is no matter what happens with trade policy, the world

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Speaker 1: is not going to get less small. But well, I

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Speaker 1: don't know about you. Okay, Hong Kong. Fine, Europe, let's

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Speaker 1: talk Europe. The stock six hundreds down over the last

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Speaker 1: twelve months. I don't think many people in the United

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Speaker 1: States actually realized that if they listened to the amount

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Speaker 1: of people that said by Europe, by Europe over the

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Speaker 1: last twelve months, they might be under water. What is

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Speaker 1: going on? The economy is better, yeah, the equity markets

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Speaker 1: under performing, Yeah, it's it's it's it's a great question.

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Speaker 1: The europe economy is doing much better. Yeah, you were

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Speaker 1: talking early today about the German unemployment rate, so all

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Speaker 1: parts of Europe and southern Europe, right, there's there's it's

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Speaker 1: a it's a very strong economy. But but all the

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Speaker 1: worries concerns that are percolating here have certainly been manifested

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Speaker 1: to some extent in a lot of the valuations of

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Speaker 1: European stocks. We do still find them attractive and um.

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Speaker 1: The real issue, of course is the is the strength

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Speaker 1: of the euro right, so that has hurt the perception

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Speaker 1: of m where things may go down the road. Um.

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Speaker 1: And also some companies have had less robust earnings than

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Speaker 1: they would have had if not for the strength of

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Speaker 1: the euro are we going to get more euro strength?

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Speaker 1: Because the story for the United States over the last

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Speaker 1: twelve months and more has been dollar weakness. The last

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Speaker 1: few days, the dollar has gained some strength, But are

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Speaker 1: we going to get more dollar weakness? Is that going

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Speaker 1: to be the story from here on out? It's a

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Speaker 1: very interesting question. Um. It's actually been surprising that the

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Speaker 1: dollar has been as weak as it has been given

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Speaker 1: the perception that US rates would rise faster than the

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Speaker 1: rest of the world. In particular, I do think there's

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Speaker 1: a little bit of political concerns baked into this. I think,

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Speaker 1: you know, we talked to some of our European colleagues.

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Speaker 1: They often remind us that there's a a concern that

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Speaker 1: the US is just a little less certain than it

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Speaker 1: used to be, and that has caused some lack of

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Speaker 1: interest in owning a lot of the currency. Cathy Fisher,

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Speaker 1: it's been great to catch out with you. In charge

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Speaker 1: of Time Horizon at a lance Burn state with an

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Speaker 1: investment had great a catch out. I have been waiting

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Speaker 1: and waiting and waiting for this interview. The quiet story

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Speaker 1: across the years of Middle East text, the Harani history

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Speaker 1: of the Arabs people. I think of Lacy writing about

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Speaker 1: the House of SAUDA is the Saudi Kingdom. The author

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Speaker 1: is Ali al Shabi, is a really interesting take on

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Speaker 1: what's going on, and it isn't. We're thrilled to have

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Speaker 1: you in our studies. You live, you live in Portugal

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Speaker 1: right now. I live in Washington, d You live in

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Speaker 1: Washington now. Okay, that's you've moved on from that. The

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Speaker 1: Saudi Kingdom is a must read for anybody looking. This

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Speaker 1: house is sound, but this is a new house is sound?

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Speaker 1: What is the distinguishing feature of this charm offensive of

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Speaker 1: Saudi Arabia versus the old House is Saud? Well, the

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Speaker 1: old House of Saud was a an extremely um conservative

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Speaker 1: monarchy ruled by old men. You know, the average age

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Speaker 1: of the rulers was like seventy years old. And one

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Speaker 1: of the problems with that was that, you know, the

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Speaker 1: elderly tend not to want to take bold steps, so

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Speaker 1: important issues that had to be addressed kept on being

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Speaker 1: kicked down the road. Under the new Saudi Arabia, where

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Speaker 1: you have a thirty two year old conference and Chief

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Speaker 1: Executive h he has in the last two years taken

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Speaker 1: on a lot of key difficult issues and address them,

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Speaker 1: whether that was the conservative religious establishment and extremism, where

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Speaker 1: he's attacked that head on, whether it was empowering women,

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Speaker 1: he's attacked that head on, whether it was subsidies of

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Speaker 1: the economy that were encouraging tremendous waste and energy and

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Speaker 1: water he again has so he's attacked a lot of difficult,

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Speaker 1: politically controversial issues within the charm offensive a visiting here,

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Speaker 1: visiting there, He's going to meet with Oprah, I think

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Speaker 1: at some point and all that come on. There's a

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Speaker 1: backstory here. There's got to be a lot of the

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Speaker 1: difficulty of bringing a Ramco public. What's the backstory that

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Speaker 1: a pro like you sees that's not covered within the

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Speaker 1: media coverage. No, I mean the backstory is that he

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Speaker 1: is very interested in connecting with global business Sargirabia is.

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Speaker 1: He wants to tell the business community that they're open,

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Speaker 1: they're open for business, and he wants to encourage them.

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Speaker 1: That's simple. It really is that simple. There is no secret,

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Speaker 1: There is no secret source that's hiding behind anything. Um.

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Speaker 1: He wants to open up the country. He wants people

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Speaker 1: to invest. He's connecting and personally, he's connecting with the

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Speaker 1: titans of industry and finance. That's also good for him.

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Speaker 1: It provides him with exposure to what's happening um and

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Speaker 1: it allows him to explain, not only explained, but allows

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Speaker 1: them to see the sort of enthusiasm and energy and

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Speaker 1: drive that he has. We should just mention on this

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Speaker 1: idea of opening up the Saudi Arabian economy. Yesterday the

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Speaker 1: Footsie Russell said it's classifying the country as a secondary

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Speaker 1: emerging market, making its equities eligible for broader indexes. This

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Speaker 1: just sort of builds on this international interest in investing

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Speaker 1: in Saudi Arabia. Are there any downsides politically? This is

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Speaker 1: very interesting example because Saba should have been included in

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Speaker 1: the index is ten fifteen years ago. It's the largest

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Speaker 1: market in the region, but the authorities had been too

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Speaker 1: slow and they had not put in place the laws, etcetera.

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Speaker 1: So again under this new government that has been accelerated,

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Speaker 1: so things that should have been done fifteen years ago

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Speaker 1: and ten years ago are being brought in. Now are

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Speaker 1: there specific political issues with this? I mean among among

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Speaker 1: sort of the population. I mean traditionally, traditionally the bureaucracy

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Speaker 1: in Saide Arabia was afraid of opening up the markets

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Speaker 1: for sort of old fashioned approach, concerns of hot money

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Speaker 1: coming in and things like that, so they delayed the

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Speaker 1: structural changes that were required. It didn't have anything to

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Speaker 1: do with outside investors trying to assert kind of cultural

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Speaker 1: norms on them are dictating what was okay with market really,

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Speaker 1: but I'm just saying, the stock market is a very

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Speaker 1: very very uh soft way of investing in the market.

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Speaker 1: You can go in and go out quite quickly. So

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Speaker 1: I don't know, I think it was just really you know,

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Speaker 1: laziness on behalf of the bureaucracy. Frankly, and and and

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Speaker 1: I mean I I started my career in the Central Bank,

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Speaker 1: and I remember that these discussions and and you know,

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Speaker 1: the Saudi Arabia should have been included in these indexes

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Speaker 1: fifteen years like culturally have they moved on? At the

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Speaker 1: end of your wonderful book the Saudi Kingdom, you have appendices,

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Speaker 1: and one of them is the hobby movement. His this

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Speaker 1: new generational shift removed the family from an austere religious

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Speaker 1: belief dating back to about seventeen. Well, it is it

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Speaker 1: is starting to temper. That it's temporary. It's tempering because

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Speaker 1: these things take time, Okay, you know, They're not something

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Speaker 1: that you can snap your finger, of course and and

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Speaker 1: doing in one year, but he has the Crown Prince

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Speaker 1: has certainly begun this process of softening and also reducing

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Speaker 1: the influence of the reactionary right wing, if you want

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Speaker 1: to call it that, the religious establishment on daily life?

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Speaker 1: Then how does President Trump fit into this? If the

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Speaker 1: if the absolute nexus at your princeton is an analysis

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Speaker 1: of Iran Saudi Arabia is the is the at the

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Speaker 1: border of Iran and at the border of that debate

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Speaker 1: When you hear the President's comments on it and Mr

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Speaker 1: Bolton's comments on it, how do you respond to that? Well,

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Speaker 1: I mean is very much on the same page as

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Speaker 1: the White House on this, uh and and that's why

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Speaker 1: the relationship is quite close. The White House sees the

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Speaker 1: risk from Iran in very much the same way that

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Speaker 1: size generational leadership does. Absolutely absolutely so. As a crumb

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Speaker 1: Prince Mohammed bin Salman does this charm offensive tour which

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Speaker 1: is under underway right now. How much support with respect

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Speaker 1: to sort of a backdrop of bureaucrats behind him does

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Speaker 1: he have and sort of you know, is he is

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Speaker 1: he engendering support politically at home, and he's engendering support,

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Speaker 1: but also obviously he's engendering resistance because change brings winners

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Speaker 1: and losers. So you know, there are there are there

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Speaker 1: are there are losers within the royal family, there are

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Speaker 1: losers in the religious class um, and there are losers

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Speaker 1: within the business community. So that all you know, there

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Speaker 1: will be resistance, and there is resistance, but he seems

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Speaker 1: to have really overwhelmed that resistance so that there is

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Speaker 1: no public manifestation of any resistance. UM. And you know,

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Speaker 1: he's a very determined and powerful personality and he's steamrolling

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Speaker 1: everything through. Frankly, we look forward to speaking again. Thank

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Speaker 1: you so much for coming in. Thank you Running Awash

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Speaker 1: a h with us of course his book from a

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Speaker 1: few years back. The Saudi Kingdom greatly appreciate his attendance

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Speaker 1: this morning. Lisa Bramwinson, Tom Keenyan with us. He is

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Speaker 1: the Chairman of the President's Council of Economic Advised as

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Speaker 1: a gentleman from the University of Pennsylvania. Kevin Hassett, Dr Hassett,

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Speaker 1: good morning. Oh, it's great to be her time. And

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Speaker 1: if you don't call me Kevin, then I'm gonna have

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Speaker 1: to get rough with you, Kevin, I'm gonna I I'm

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Speaker 1: gonna give you a massive victory lap. Here. Three quarter

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Speaker 1: moving average of g d P is a Hassett trump

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Speaker 1: like three point one percent there is. The capital ending

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Speaker 1: is soaring, just like we said, right, Kevin, you know

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Speaker 1: I'm I'm equal opportunity. I'll tear in a viral part

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Speaker 1: when i have to, and I'll give him credit when

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Speaker 1: it's there. You are delivering three g d P. Everybody

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Speaker 1: on the street says we're gonna ebb in fade as

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Speaker 1: we move forward, push against that. How do we sustain

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Speaker 1: hass GDP has GDP, I don't know it's Americans GDP.

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Speaker 1: But what's going to happen this year is that there's

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Speaker 1: going to be a surgeon capital formation that is a

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Speaker 1: supply side push that drives growth higher without putting upward

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Speaker 1: pressure on prices. And the capital formation is already visible

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Speaker 1: in the advanced durables data. And it's a massive turnaround

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Speaker 1: from what happened at the end of the Obama administration.

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Speaker 1: Because at the end of the Obama administration in capital

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Speaker 1: spending was actually a negative for GDP growth because it

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Speaker 1: was such an anti business climate. And so what you're

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Speaker 1: basically doing is seeing in part a return to normal,

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Speaker 1: a normal attitude towards business, and in part benefit of

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Speaker 1: this large tax cut. Alright, Kevin, So move us forward

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Speaker 1: with respect to spending. We just have passed this tax cut.

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Speaker 1: By most estimates, it will add more than a trillion

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Speaker 1: dollars to the deficit. Is their oxygen in the room

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Speaker 1: left for infrastructure spending? And if so, is there anything

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Speaker 1: concrete in the works right now with respect to that initiative? Oh? Absolutely,

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Speaker 1: and the President's talking about that today. Uh. In fact,

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Speaker 1: the President's infrastructure plan is very well developed. We have

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Speaker 1: an economic report, uh that this count of Economic Advisors

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Speaker 1: put out yesterday that goes through the opportunities for infrastructure

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Speaker 1: investment and the different ways that we could possibly do it.

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Speaker 1: Although something that you know, we discussed on a call

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Speaker 1: with Turtleist yesterday is that you know, if we take

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Speaker 1: half to take a victory in every bill, you know,

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Speaker 1: and so for example, we've got a workforce plan to

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Speaker 1: make it easier to train people to work on infrastructure

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Speaker 1: checks and if there's some bill where we can get

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Speaker 1: the enforced plan, and then we're going to do it.

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Speaker 1: But but I mean the president's preference would be, you know,

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Speaker 1: a big, huge bill like the tax bill that solves

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Speaker 1: it all at once. But we're going to be fighting,

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Speaker 1: you know, in the trenches every day to get every

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Speaker 1: little bit of this infrastructure. Just fix the potholes on

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Speaker 1: West End Avenue over on the Upper West Side. That's all.

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Speaker 1: We come back to. The thing, Tom, this is the

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Speaker 1: thing that surprised me the most about our own ce

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Speaker 1: A study, which is that, what's the one thing that

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Speaker 1: you have in your mind the idea that the Obama

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Speaker 1: administration did write its infrastructure right because they had all

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Speaker 1: these shovel ready projects they spent all this money on

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Speaker 1: and they talk about it all the time. Right, Okay,

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Speaker 1: do you know that the contribution to GDP growth from

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Speaker 1: public capital went negative in the second term, And I'm

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Speaker 1: telling you that they dropped them all on it, and

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Speaker 1: so you got these pot bubbles everywhere because it's been

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Speaker 1: allowed to rot. What are you gonna do when CBO

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Speaker 1: and others start modeling one point four and one point

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Speaker 1: five trillion dollar budget deficits, how are you and Mr

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Speaker 1: card Logan to respond to that? Well, you know, if

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Speaker 1: I'm not sure that we expect to see anything like that.

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Speaker 1: But I can tell you that the President was very

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Speaker 1: disappointed in the spending increase. You know, I was head

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Speaker 1: dinner with mcmilvany a couple of signed the bill. He

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Speaker 1: is going to take a much stronger attitude next time.

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Speaker 1: I'm quite sure you're right. But then, how are we

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Speaker 1: increasing spending on infrastructure? Oh? How because we're cutting spending

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Speaker 1: on other things. But we're the president's open spending on

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Speaker 1: the president. If you look at the President's budget, it's

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Speaker 1: listed left and right. But the other thing that we

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Speaker 1: liked that our report yesterday is that the President's open

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Speaker 1: to other funding opportunity, but increased the gas tax or

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Speaker 1: user fees and things like that. Kevin, when you were

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Speaker 1: in the think tank racket down in Washington, you had

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Speaker 1: the Grand Banks forty two on the Potomac and the

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Speaker 1: name of the boat was guns and butter. That's what

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Speaker 1: we just got. We just got a guns and butter

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Speaker 1: fiscal policy. How are you at the White House going

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Speaker 1: to respond when Mia McGuinness or some one like that,

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Speaker 1: or critically CBO say we've got a one point for

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Speaker 1: a trillion dollar chronic deficit. What is what is the

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Speaker 1: White House going to do? With that. Well, well, first

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Speaker 1: of all, you have to recognize that we have a

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Speaker 1: spending problem. That's something that we recognize, and but there's

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Speaker 1: also been in the first year uh CBO estimates of

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Speaker 1: increases in deficits associated with the tax bill that we

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Speaker 1: just don't believe, and so that you have to sort

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Speaker 1: of break it up into different components. Absolutely, we need

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Speaker 1: to be tougher on spending in the future. It's clear

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Speaker 1: in our budget, but not in the omnibus that just passed.

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Speaker 1: And on the tax side, I think what's gonna happen

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Speaker 1: is you you and I started by your status the

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Speaker 1: hasset economy. That's because we're getting a lot more growth

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Speaker 1: right already, we're getting more growth than the critics, including

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Speaker 1: the can you give me the Tax Committee said that

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Speaker 1: from the tax bill, Ken, that's got to give us

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Speaker 1: more revenue. Okay, Ken, I got twenty seconds. Is all

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Speaker 1: give me a single point g d P number which

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Speaker 1: allows for your program to move forward? Is there two

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Speaker 1: point nine set run rate? Is at three point one

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Speaker 1: run rate? What is that number? Well, our program will

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Speaker 1: work for it with whatever GDP growth is. It's not

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Speaker 1: like the President's going to reside if all of a sudden,

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Speaker 1: there's one bad number. The fact is that the economical

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Speaker 1: part of the president. We go through all the things

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Speaker 1: that President Trump is doing to lift GDP growth, the

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Speaker 1: average over the next year ted years is three percent.

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Speaker 1: If there was something percent lower than that over the

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Speaker 1: next three or four years, I'd be shocked. Kevin Hassen,

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Speaker 1: thank you for the briefing. He's a chairman of the

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Speaker 1: President's Council of Economic Advisors. Thanks for listening to the

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Speaker 1: Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud,

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Speaker 1: or whichever podcast platform you prefer. I'm on Twitter at

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Speaker 1: Tom Keane before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio s