WEBVTT - Capital Spending is Soaring, Kevin Hassett Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:33.000 Bloomberg dot Com, and of course on the Bloomberg Joining 0:00:33.120 --> 0:00:35.560 us now, I'm pleased to say, joining us through the 0:00:35.640 --> 0:00:37.480 quarter as well to really keeps us up to speed 0:00:37.520 --> 0:00:40.159 on what's been happening with volatility is Ding Kern at 0:00:40.200 --> 0:00:44.360 Macro Risk Advice is founder and CEO. Joins us Now, Dean, 0:00:44.479 --> 0:00:46.760 what a quarter it's been for vol We have the 0:00:46.800 --> 0:00:49.880 technical vol shock of a month ago, and we still 0:00:49.920 --> 0:00:52.080 seem to be trying to clear that shock of a 0:00:52.120 --> 0:00:54.400 month ago. Why, Dean, Yeah, I think that's a That's 0:00:54.400 --> 0:00:56.760 a great way to frame it, is that this inverse 0:00:56.880 --> 0:01:00.000 vis meltdown that occurred right at the beginning of Februar 0:01:00.000 --> 0:01:02.920 worry has come and gone. That trade is de de 0:01:03.080 --> 0:01:06.360 leveraged UH and so you've still got a tremendous amount 0:01:06.440 --> 0:01:12.040 of a volatility UH inequity markets specifically UM and it's 0:01:12.040 --> 0:01:14.120 just so much different than two thousand and seventeen. So 0:01:14.160 --> 0:01:16.199 it's telling you that there's just a lot of tension. 0:01:16.280 --> 0:01:19.080 I I would frame it as follows, Um, you talked 0:01:19.080 --> 0:01:23.240 about bond yields just before UM, so, so you've got 0:01:23.240 --> 0:01:26.560 bond prices rallying as stock prices are now faltering a 0:01:26.600 --> 0:01:29.600 little bit. But in the in the days before the 0:01:29.640 --> 0:01:34.560 inverse vix unwind UM, one of the sources of instability 0:01:34.640 --> 0:01:37.560 was rising bond yields. Remember the days before the x 0:01:37.600 --> 0:01:41.800 I v U imploded. You had a couple of sessions 0:01:41.800 --> 0:01:44.360 in which bond yields went up a lot, and folks 0:01:44.360 --> 0:01:47.280 were getting very, very worried about inflation the Fed's response, 0:01:47.360 --> 0:01:50.320 and that was destabilizing for stock prices. So all in all, 0:01:51.040 --> 0:01:54.800 you have a situation where um movements in bond prices 0:01:54.840 --> 0:01:57.960 either to the high side or the low side seemed 0:01:57.960 --> 0:02:01.560 to be uh not a good thing uh for for equities. 0:02:01.600 --> 0:02:04.160 And when one of our core tenants at Macro Risk 0:02:04.200 --> 0:02:07.440 Advisors has been that the equity market is is basically 0:02:07.440 --> 0:02:10.200 short volatility on the bond market. If you if you 0:02:10.560 --> 0:02:13.760 have a situation in which bond bond yields are stable, UM, 0:02:13.800 --> 0:02:17.120 that's probably good for risk assets. It suggests a uh 0:02:17.120 --> 0:02:19.320 an environment in which you can take risk. But if 0:02:19.760 --> 0:02:21.960 UM either there's too much growth or too little growth, 0:02:22.120 --> 0:02:24.360 equity markets have in trouble digesting it. Dane, There's a 0:02:24.360 --> 0:02:26.600 really interesting thing happening though, that the equity voul has 0:02:26.680 --> 0:02:30.639 has remained isolated to equity vol It hasn't led out 0:02:30.680 --> 0:02:33.520 into other asset classes. Now, I would have expected one 0:02:33.520 --> 0:02:36.239 of two things to happen, for it to either bleed 0:02:36.680 --> 0:02:39.680 or settle down UM, neither of which has happened. So 0:02:39.680 --> 0:02:41.040 so how is this going to evolve in the come 0:02:41.040 --> 0:02:43.000 in months? As you see things plan out right, It's 0:02:43.000 --> 0:02:46.000 a great point that it's this is a incredibly US 0:02:46.160 --> 0:02:48.320 centric risk environment. So if you look at all the 0:02:48.440 --> 0:02:52.120 cross asset corollarias, whether it's fex vol or if you 0:02:52.160 --> 0:02:55.240 even look at UM certain spread relationships, look at SMP 0:02:55.400 --> 0:02:59.920 volatility versus eurostocks implied volatility, there's actually a premium for 0:03:00.040 --> 0:03:02.040 and P. It's very rare to have this happen. So, 0:03:02.320 --> 0:03:05.160 as you know, very US equity centric. UM it can 0:03:05.160 --> 0:03:08.160 settle down. Uh, you know, if if the daily moves 0:03:08.160 --> 0:03:10.200 in the SMP start to settle down, then the VIX 0:03:10.240 --> 0:03:12.160 is gonna come down. Those those two things are gonna 0:03:12.160 --> 0:03:16.480 act in tandem. UM on a on a less optimistic note, 0:03:16.520 --> 0:03:19.280 you could say that um, the old adage when the 0:03:19.360 --> 0:03:22.880 US catches a cold, uh, when when the US, the 0:03:22.919 --> 0:03:24.320 rest of the world catches the cult. So if you're 0:03:24.360 --> 0:03:28.560 seeing something UM start in the US as a as 0:03:28.600 --> 0:03:31.560 a lack of stability, it tends to at least potentially 0:03:31.560 --> 0:03:34.280 broadened to other asset classes. In geography, does a guy 0:03:34.360 --> 0:03:38.960 like you game gauge judge the distance of the dots 0:03:39.320 --> 0:03:43.160 from the market, the FED dots? Yeah, yeah, I think 0:03:43.160 --> 0:03:46.480 it's important. I think is it moving right now? Because 0:03:46.480 --> 0:03:49.280 to me, John Farrell helped me here because John Farrell 0:03:49.360 --> 0:03:52.840 is the star of the TV show The Real Will 0:03:52.920 --> 0:03:55.600 we see that he's plugging my Bond show. You will 0:03:55.640 --> 0:03:59.440 see it like today, you will see it. Demeandbers so great. 0:03:59.480 --> 0:04:03.280 They shift from Friday to Thursday. They did that. But 0:04:03.400 --> 0:04:05.960 the fact of the matter is the debate shifted the 0:04:06.040 --> 0:04:10.600 last two weeks. Yeah, and so I think back to 0:04:10.680 --> 0:04:14.240 the sort of FED dots and the FED response UM 0:04:14.360 --> 0:04:17.440 and it's and and to the recent sort of counter 0:04:17.480 --> 0:04:20.360 trend rally in the In the tenure, UH, you have 0:04:20.480 --> 0:04:24.520 this scenario in which folks were worried that, uh, the 0:04:24.520 --> 0:04:27.480 inflation was moving too quickly and that the market was 0:04:27.680 --> 0:04:32.000 sort of trying to adjust to an environment where the 0:04:32.000 --> 0:04:36.040 feds rhetoric would change. UM. I personally thought Powell was 0:04:36.040 --> 0:04:39.479 was masterful in his non answers, which is what the 0:04:39.480 --> 0:04:41.880 FED is, which was surprising because we thought he might 0:04:41.920 --> 0:04:44.880 not bake it was. It was a an old pro uh. 0:04:45.000 --> 0:04:47.719 You know, if you look back at Bernanke's first press conference, 0:04:47.760 --> 0:04:50.200 a couple of them and and saying with yelling. They 0:04:50.200 --> 0:04:53.880 were not as skilled at saying nothing yell and learned 0:04:53.880 --> 0:04:56.520 to say nothing over time. But Pale did a very 0:04:56.520 --> 0:05:00.680 good job. And uh. The the recent inflation data has cooperated, 0:05:00.800 --> 0:05:02.440 and I think this is where I would say the 0:05:02.440 --> 0:05:06.520 market is especially vulnerable right now is we have a 0:05:06.600 --> 0:05:10.160 small reprieve from the worry about higher bond yields and 0:05:10.240 --> 0:05:14.720 higher inflation because we got an NFP where non farm payrolls, 0:05:14.760 --> 0:05:18.520 where wage growth was uh more contained, and then the 0:05:18.560 --> 0:05:22.520 cp I was also a market friendly number. Um. If 0:05:22.560 --> 0:05:26.560 those return as market worries, given some of the other 0:05:26.640 --> 0:05:29.440 sources of of concern, I think this is gonna be 0:05:29.480 --> 0:05:31.440 challenging because John one of the great themes of a 0:05:31.520 --> 0:05:33.680 Thursday before we you know, do our reading through the 0:05:33.720 --> 0:05:36.600 week show and John, even though you're in America, are 0:05:36.640 --> 0:05:46.840 you off Monday because you're British together together we are? Um, yeah, whatever, 0:05:47.120 --> 0:05:51.480 But anyways, John, seriously, we're within the range. We're not 0:05:51.640 --> 0:05:54.440 out of the range. On the tenure. We did break 0:05:54.440 --> 0:05:56.400 out of the range just in the last couple of days, 0:05:56.400 --> 0:05:57.920 and I thought it was interesting that we broke out 0:05:58.000 --> 0:06:00.320 to the downside and not to the upside. The other 0:06:00.320 --> 0:06:02.400 thing I think that's really been interested about the quarter 0:06:02.440 --> 0:06:05.120 that we've just had Dean, is that actually, despite the 0:06:05.200 --> 0:06:08.920 Voal shock, people haven't taken out their expectations for hikes, 0:06:09.279 --> 0:06:11.919 And that's what's really played into this flatty yield curve story, 0:06:11.960 --> 0:06:15.040 because treasuries have acted as a shock absorber, but only 0:06:15.120 --> 0:06:17.359 further down the curve in a ten year space, So 0:06:17.480 --> 0:06:20.200 yields have come in, but a two year notice remained 0:06:20.240 --> 0:06:22.760 really really rather rancord, and yields haven't come down at all. 0:06:23.160 --> 0:06:26.240 No one is pricing out rate hikes despite the Voal shock, 0:06:26.680 --> 0:06:28.320 So I guess we end up with a spread of 0:06:28.760 --> 0:06:31.119 fifty basis points on two s tends. How much should 0:06:31.120 --> 0:06:33.200 I read into that based on the fact that the 0:06:33.279 --> 0:06:35.279 Voal shock and the idea that actually no one's removing 0:06:35.320 --> 0:06:38.920 their rate high expectations. Yeah, so I think the two 0:06:38.960 --> 0:06:40.720 S turns spread is something we should all be watching. 0:06:40.760 --> 0:06:45.479 It's it's had a um correlation with future changes in 0:06:45.480 --> 0:06:48.600 in economic growth and a looser correlation with stock prices. 0:06:48.640 --> 0:06:51.520 But it's certainly something to to focus on. The feed 0:06:51.680 --> 0:06:55.200 is is commenting on it itself. I'll tell you, I 0:06:55.240 --> 0:06:57.200 look at the two S turns spread, at least for now, 0:06:57.360 --> 0:07:00.640 is something that is has been a part of the 0:07:01.000 --> 0:07:04.000 bullmarket story. In other words, the fetest tighten because it can. 0:07:04.800 --> 0:07:06.760 And so here's what I would say. Actually, one of 0:07:06.920 --> 0:07:10.160 to me, you know, Tommy asked me a lot about hedges. UM, 0:07:10.200 --> 0:07:12.160 the vix is up at you know, north of twenty. 0:07:12.480 --> 0:07:15.559 These hedges are not cheap right there. They're not only 0:07:15.920 --> 0:07:18.200 they're they're difficult to carry. There's a lot of things 0:07:18.240 --> 0:07:20.080 that you're fighting when you buy a put on the 0:07:20.160 --> 0:07:23.640 equity optional. So what I would say is, and this 0:07:23.720 --> 0:07:25.840 is again a focus for us, is trying to find 0:07:25.840 --> 0:07:28.680 those hedges that carry better and have a couple of 0:07:28.680 --> 0:07:30.880 different ways to win. And so here here's what I 0:07:30.880 --> 0:07:32.720 would say. One of the things to really look at 0:07:33.480 --> 0:07:36.880 is UM is the move index. So this is the 0:07:36.920 --> 0:07:41.560 Merrill Lynch VIX UH index of of bond volatility. This 0:07:41.720 --> 0:07:45.240 is retraced most of its increase from early February. UM. 0:07:45.280 --> 0:07:47.480 These options are actually quite cheap, and so if you 0:07:47.520 --> 0:07:51.880 want to real tail trade UH, you can buy essentially 0:07:51.920 --> 0:07:56.640 a call option on two your bond prices. UM basically 0:07:56.680 --> 0:08:00.080 saying things get so bad that the FED actually the 0:08:00.080 --> 0:08:03.640 the FEDS timeline of tightening actually gets distrust. No one's 0:08:03.680 --> 0:08:06.360 actually betting on that, right. And what you touch upon there, 0:08:06.440 --> 0:08:09.320 which is so important is if you're going to do 0:08:09.400 --> 0:08:13.360 a hedge, if you get protection, you have to pay 0:08:13.440 --> 0:08:16.360 for it, and right now in so many areas that 0:08:16.640 --> 0:08:20.000 really eats into potential total return, right And I would 0:08:20.040 --> 0:08:22.720 say that this, this is what makes these risk transition 0:08:22.760 --> 0:08:25.920 periods so difficult, is that, UM, there is a recency 0:08:25.960 --> 0:08:28.440 bias that that everyone has. When you stare at a 0:08:29.040 --> 0:08:31.840 VIX and you were staring at a ten VIS last year, 0:08:32.280 --> 0:08:34.000 and you say, wow, how could I do it now? 0:08:34.000 --> 0:08:36.920 How could I buy a hedge that's so much more 0:08:36.960 --> 0:08:39.120 costly than it was? And so you get anchored to 0:08:39.280 --> 0:08:43.040 what was instead of looking forward in terms of how 0:08:43.040 --> 0:08:45.959 the risk environment is changing. Oh, very good, Dean CURNI 0:08:46.000 --> 0:09:03.040 thank you so much. Macro Risk Advisors greatly appreciated. John 0:09:03.120 --> 0:09:05.200 Faro and turnkey John. Why don't you bring in kept 0:09:05.240 --> 0:09:10.079 the nearras of Aby Bernstein, who's in the business of courage, 0:09:10.760 --> 0:09:14.560 which recently has been increased and needed. She's in the 0:09:14.559 --> 0:09:17.600 business of time horizon. Kathy Fishing, I'm not I don't 0:09:17.679 --> 0:09:21.120 have that because I'm in the triple leverage or cash yes, 0:09:21.160 --> 0:09:23.839 which means nothing really matters to you. Just sit there, 0:09:24.120 --> 0:09:25.520 Remind me again, what are you paying to be in 0:09:25.640 --> 0:09:32.880 one basic Gathy is great to have you with us. 0:09:32.880 --> 0:09:34.560 Talk to me about the importance of time and rising 0:09:34.640 --> 0:09:37.079 for a really noisy quarter. How do you just look 0:09:37.160 --> 0:09:39.440 through this and look ahead. I'm really glad you started 0:09:39.480 --> 0:09:42.120 that way. Time horizon is clearly the most important thing 0:09:42.120 --> 0:09:44.360 for anything when you look at your money in that 0:09:44.640 --> 0:09:46.760 if you're going to spend in the short term, of course, 0:09:46.800 --> 0:09:49.600 you've got to have your money very carefully, safely managed. 0:09:49.920 --> 0:09:52.480 But when you go out five, ten, twenty years, which 0:09:52.559 --> 0:09:56.040 really most people are managing their money for, that's when 0:09:56.040 --> 0:09:58.320 you want to make sure you're taking enough risk. And 0:09:58.440 --> 0:10:00.520 risk means you're going to have periods like now where 0:10:00.520 --> 0:10:04.080 you have increased volatility. But even today we have to 0:10:04.080 --> 0:10:07.280 remember volatility is coming back to more normal levels. It's 0:10:07.360 --> 0:10:11.400 not shocking. We just had a ridiculously calm period in 0:10:11.440 --> 0:10:16.240 two thousand and sixteen seventeen when volatility was abnormally low, 0:10:16.440 --> 0:10:19.560 and now we're getting back to more realistic kinds of volatiles. So, 0:10:19.600 --> 0:10:21.760 with markets swinging all over the place, when the clouds 0:10:21.760 --> 0:10:24.280 start calling you up and saying, Kathy, I'm scared, what 0:10:24.320 --> 0:10:26.760 are you saying back to them? Well, actually our clients 0:10:26.760 --> 0:10:30.199 are not, because we've been talking about how low volatility 0:10:30.360 --> 0:10:32.080 was and the fact that it is now more normal. 0:10:32.520 --> 0:10:36.120 So you know, I think setting expectations and reminding the 0:10:36.160 --> 0:10:39.400 way markets do work long run is the most important 0:10:39.440 --> 0:10:42.520 thing for long term investors because there will be ups 0:10:42.559 --> 0:10:45.400 and downs all the time, and this this period is unusual. 0:10:45.440 --> 0:10:48.000 We've got a lot of change. We talked about rates, 0:10:48.040 --> 0:10:51.160 we're talking about the risk of trade wars. Is something 0:10:51.200 --> 0:10:52.880 no one would have thought we'd be talking about in 0:10:52.920 --> 0:10:55.880 this in this day and age, when globalization has driven 0:10:56.080 --> 0:10:59.959 the strong economy of the past twenty years. So these 0:11:00.000 --> 0:11:03.320 are surprising events. Can I This came up earlier this 0:11:03.360 --> 0:11:07.440 week and something Alliance Bernstein's famous for can I get 0:11:07.440 --> 0:11:12.520 a globalization proxy by buying US multinationals or do I 0:11:12.640 --> 0:11:16.240 have to go abroad to get that globalization? You still 0:11:16.280 --> 0:11:19.599 need to buy overseas stocks because part of part of 0:11:19.600 --> 0:11:21.760 the reason it's currency, right, you do want to have 0:11:21.840 --> 0:11:24.600 currency exposure in your non U S stocks as opposed 0:11:24.640 --> 0:11:27.920 to just buying multinational And obviously all companies are going 0:11:27.960 --> 0:11:31.160 to hedge their currency risk as suits them, so you're 0:11:31.240 --> 0:11:35.120 you're getting multiple ways of getting currency exposure. But we 0:11:35.160 --> 0:11:39.439 would certainly argue very strongly you want to have stocks 0:11:39.480 --> 0:11:43.120 that are domiciled in foreign countries and and listed on 0:11:43.200 --> 0:11:46.760 different markets. And it's hugely different Kathy, and that a 0:11:46.800 --> 0:11:49.199 few years ago you bought the telephone company and if 0:11:49.240 --> 0:11:52.520 you were bold, you bought the concrete company that was 0:11:52.240 --> 0:11:58.360 that was all international. And yeah, yeah, we've pushed clients 0:11:58.400 --> 0:12:02.679 to tou to about a fort exposure to US for 0:12:02.880 --> 0:12:05.720 zero for zero. As you know, the world the world 0:12:06.000 --> 0:12:10.000 is is moving towards fifty, so that would still imply 0:12:10.040 --> 0:12:13.240 and overweight to U S stocks. But certainly the world 0:12:13.360 --> 0:12:16.640 is no matter what happens with trade policy, the world 0:12:16.720 --> 0:12:22.280 is not going to get less small. But well, I 0:12:22.320 --> 0:12:27.440 don't know about you. Okay, Hong Kong. Fine, Europe, let's 0:12:27.440 --> 0:12:30.200 talk Europe. The stock six hundreds down over the last 0:12:30.240 --> 0:12:32.320 twelve months. I don't think many people in the United 0:12:32.320 --> 0:12:34.959 States actually realized that if they listened to the amount 0:12:34.960 --> 0:12:36.839 of people that said by Europe, by Europe over the 0:12:36.920 --> 0:12:40.319 last twelve months, they might be under water. What is 0:12:40.360 --> 0:12:43.439 going on? The economy is better, yeah, the equity markets 0:12:43.480 --> 0:12:46.280 under performing, Yeah, it's it's it's it's a great question. 0:12:46.800 --> 0:12:49.440 The europe economy is doing much better. Yeah, you were 0:12:49.440 --> 0:12:52.600 talking early today about the German unemployment rate, so all 0:12:52.679 --> 0:12:55.439 parts of Europe and southern Europe, right, there's there's it's 0:12:55.480 --> 0:12:59.480 a it's a very strong economy. But but all the 0:12:59.520 --> 0:13:04.720 worries concerns that are percolating here have certainly been manifested 0:13:04.720 --> 0:13:06.880 to some extent in a lot of the valuations of 0:13:06.920 --> 0:13:11.120 European stocks. We do still find them attractive and um. 0:13:11.160 --> 0:13:13.440 The real issue, of course is the is the strength 0:13:13.440 --> 0:13:16.480 of the euro right, so that has hurt the perception 0:13:16.800 --> 0:13:19.400 of m where things may go down the road. Um. 0:13:19.440 --> 0:13:22.520 And also some companies have had less robust earnings than 0:13:22.559 --> 0:13:24.840 they would have had if not for the strength of 0:13:24.840 --> 0:13:28.040 the euro are we going to get more euro strength? 0:13:28.120 --> 0:13:30.920 Because the story for the United States over the last 0:13:31.240 --> 0:13:34.199 twelve months and more has been dollar weakness. The last 0:13:34.240 --> 0:13:36.640 few days, the dollar has gained some strength, But are 0:13:36.640 --> 0:13:38.240 we going to get more dollar weakness? Is that going 0:13:38.280 --> 0:13:39.720 to be the story from here on out? It's a 0:13:39.840 --> 0:13:43.440 very interesting question. Um. It's actually been surprising that the 0:13:43.520 --> 0:13:45.960 dollar has been as weak as it has been given 0:13:46.440 --> 0:13:49.400 the perception that US rates would rise faster than the 0:13:49.400 --> 0:13:52.319 rest of the world. In particular, I do think there's 0:13:52.360 --> 0:13:55.400 a little bit of political concerns baked into this. I think, 0:13:55.760 --> 0:13:58.120 you know, we talked to some of our European colleagues. 0:13:58.160 --> 0:14:00.840 They often remind us that there's a a concern that 0:14:00.880 --> 0:14:03.280 the US is just a little less certain than it 0:14:03.360 --> 0:14:06.160 used to be, and that has caused some lack of 0:14:06.200 --> 0:14:08.760 interest in owning a lot of the currency. Cathy Fisher, 0:14:08.800 --> 0:14:10.760 it's been great to catch out with you. In charge 0:14:10.760 --> 0:14:13.240 of Time Horizon at a lance Burn state with an 0:14:13.240 --> 0:14:25.120 investment had great a catch out. I have been waiting 0:14:25.240 --> 0:14:28.520 and waiting and waiting for this interview. The quiet story 0:14:29.200 --> 0:14:33.160 across the years of Middle East text, the Harani history 0:14:33.160 --> 0:14:35.960 of the Arabs people. I think of Lacy writing about 0:14:36.000 --> 0:14:39.560 the House of SAUDA is the Saudi Kingdom. The author 0:14:39.600 --> 0:14:43.800 is Ali al Shabi, is a really interesting take on 0:14:43.920 --> 0:14:46.560 what's going on, and it isn't. We're thrilled to have 0:14:46.640 --> 0:14:49.400 you in our studies. You live, you live in Portugal 0:14:49.520 --> 0:14:51.400 right now. I live in Washington, d You live in 0:14:51.440 --> 0:14:55.160 Washington now. Okay, that's you've moved on from that. The 0:14:55.200 --> 0:15:00.160 Saudi Kingdom is a must read for anybody looking. This 0:15:00.280 --> 0:15:03.720 house is sound, but this is a new house is sound? 0:15:04.160 --> 0:15:08.720 What is the distinguishing feature of this charm offensive of 0:15:08.760 --> 0:15:12.760 Saudi Arabia versus the old House is Saud? Well, the 0:15:12.840 --> 0:15:17.680 old House of Saud was a an extremely um conservative 0:15:17.880 --> 0:15:21.600 monarchy ruled by old men. You know, the average age 0:15:21.640 --> 0:15:24.240 of the rulers was like seventy years old. And one 0:15:24.240 --> 0:15:26.760 of the problems with that was that, you know, the 0:15:27.120 --> 0:15:31.320 elderly tend not to want to take bold steps, so 0:15:31.600 --> 0:15:34.160 important issues that had to be addressed kept on being 0:15:34.240 --> 0:15:38.240 kicked down the road. Under the new Saudi Arabia, where 0:15:38.240 --> 0:15:40.440 you have a thirty two year old conference and Chief 0:15:40.440 --> 0:15:45.000 Executive h he has in the last two years taken 0:15:45.000 --> 0:15:48.680 on a lot of key difficult issues and address them, 0:15:49.800 --> 0:15:54.400 whether that was the conservative religious establishment and extremism, where 0:15:54.400 --> 0:15:58.080 he's attacked that head on, whether it was empowering women, 0:15:58.280 --> 0:16:01.880 he's attacked that head on, whether it was subsidies of 0:16:01.880 --> 0:16:05.800 the economy that were encouraging tremendous waste and energy and 0:16:05.840 --> 0:16:10.240 water he again has so he's attacked a lot of difficult, 0:16:10.680 --> 0:16:15.920 politically controversial issues within the charm offensive a visiting here, 0:16:16.080 --> 0:16:18.120 visiting there, He's going to meet with Oprah, I think 0:16:18.200 --> 0:16:20.320 at some point and all that come on. There's a 0:16:20.360 --> 0:16:23.160 backstory here. There's got to be a lot of the 0:16:23.200 --> 0:16:27.520 difficulty of bringing a Ramco public. What's the backstory that 0:16:27.600 --> 0:16:30.840 a pro like you sees that's not covered within the 0:16:30.880 --> 0:16:34.240 media coverage. No, I mean the backstory is that he 0:16:35.600 --> 0:16:40.000 is very interested in connecting with global business Sargirabia is. 0:16:40.040 --> 0:16:42.240 He wants to tell the business community that they're open, 0:16:42.440 --> 0:16:44.480 they're open for business, and he wants to encourage them. 0:16:44.640 --> 0:16:47.360 That's simple. It really is that simple. There is no secret, 0:16:47.400 --> 0:16:50.920 There is no secret source that's hiding behind anything. Um. 0:16:51.000 --> 0:16:52.840 He wants to open up the country. He wants people 0:16:52.840 --> 0:16:56.040 to invest. He's connecting and personally, he's connecting with the 0:16:56.040 --> 0:16:59.360 titans of industry and finance. That's also good for him. 0:16:59.360 --> 0:17:02.520 It provides him with exposure to what's happening um and 0:17:02.560 --> 0:17:06.159 it allows him to explain, not only explained, but allows 0:17:06.160 --> 0:17:08.879 them to see the sort of enthusiasm and energy and 0:17:09.000 --> 0:17:12.640 drive that he has. We should just mention on this 0:17:12.680 --> 0:17:16.240 idea of opening up the Saudi Arabian economy. Yesterday the 0:17:16.240 --> 0:17:19.639 Footsie Russell said it's classifying the country as a secondary 0:17:19.680 --> 0:17:24.800 emerging market, making its equities eligible for broader indexes. This 0:17:24.920 --> 0:17:28.240 just sort of builds on this international interest in investing 0:17:28.359 --> 0:17:33.040 in Saudi Arabia. Are there any downsides politically? This is 0:17:33.160 --> 0:17:37.600 very interesting example because Saba should have been included in 0:17:37.640 --> 0:17:40.520 the index is ten fifteen years ago. It's the largest 0:17:40.600 --> 0:17:44.160 market in the region, but the authorities had been too 0:17:44.160 --> 0:17:48.200 slow and they had not put in place the laws, etcetera. 0:17:48.480 --> 0:17:52.160 So again under this new government that has been accelerated, 0:17:52.680 --> 0:17:54.960 so things that should have been done fifteen years ago 0:17:55.000 --> 0:17:58.280 and ten years ago are being brought in. Now are 0:17:58.320 --> 0:18:03.320 there specific political issues with this? I mean among among 0:18:03.400 --> 0:18:08.520 sort of the population. I mean traditionally, traditionally the bureaucracy 0:18:08.520 --> 0:18:10.560 in Saide Arabia was afraid of opening up the markets 0:18:10.560 --> 0:18:13.720 for sort of old fashioned approach, concerns of hot money 0:18:13.720 --> 0:18:16.720 coming in and things like that, so they delayed the 0:18:16.880 --> 0:18:20.080 structural changes that were required. It didn't have anything to 0:18:20.119 --> 0:18:24.720 do with outside investors trying to assert kind of cultural 0:18:24.800 --> 0:18:29.560 norms on them are dictating what was okay with market really, 0:18:30.880 --> 0:18:32.680 but I'm just saying, the stock market is a very 0:18:32.800 --> 0:18:36.920 very very uh soft way of investing in the market. 0:18:36.960 --> 0:18:38.440 You can go in and go out quite quickly. So 0:18:38.480 --> 0:18:40.639 I don't know, I think it was just really you know, 0:18:40.760 --> 0:18:43.280 laziness on behalf of the bureaucracy. Frankly, and and and 0:18:43.320 --> 0:18:45.560 I mean I I started my career in the Central Bank, 0:18:45.600 --> 0:18:48.439 and I remember that these discussions and and you know, 0:18:48.520 --> 0:18:50.960 the Saudi Arabia should have been included in these indexes 0:18:51.000 --> 0:18:54.359 fifteen years like culturally have they moved on? At the 0:18:54.440 --> 0:18:57.520 end of your wonderful book the Saudi Kingdom, you have appendices, 0:18:57.600 --> 0:19:00.760 and one of them is the hobby movement. His this 0:19:00.960 --> 0:19:06.960 new generational shift removed the family from an austere religious 0:19:07.000 --> 0:19:09.960 belief dating back to about seventeen. Well, it is it 0:19:10.119 --> 0:19:13.800 is starting to temper. That it's temporary. It's tempering because 0:19:13.800 --> 0:19:16.359 these things take time, Okay, you know, They're not something 0:19:16.359 --> 0:19:19.920 that you can snap your finger, of course and and 0:19:19.960 --> 0:19:23.359 doing in one year, but he has the Crown Prince 0:19:23.640 --> 0:19:30.280 has certainly begun this process of softening and also reducing 0:19:30.320 --> 0:19:33.320 the influence of the reactionary right wing, if you want 0:19:33.520 --> 0:19:36.439 to call it that, the religious establishment on daily life? 0:19:36.560 --> 0:19:39.320 Then how does President Trump fit into this? If the 0:19:39.480 --> 0:19:43.000 if the absolute nexus at your princeton is an analysis 0:19:43.000 --> 0:19:47.320 of Iran Saudi Arabia is the is the at the 0:19:47.359 --> 0:19:49.920 border of Iran and at the border of that debate 0:19:50.280 --> 0:19:53.680 When you hear the President's comments on it and Mr 0:19:53.720 --> 0:19:57.200 Bolton's comments on it, how do you respond to that? Well, 0:19:57.240 --> 0:19:59.199 I mean is very much on the same page as 0:19:59.200 --> 0:20:01.720 the White House on this, uh and and that's why 0:20:01.720 --> 0:20:05.119 the relationship is quite close. The White House sees the 0:20:05.760 --> 0:20:08.200 risk from Iran in very much the same way that 0:20:08.280 --> 0:20:15.280 size generational leadership does. Absolutely absolutely so. As a crumb 0:20:15.320 --> 0:20:19.040 Prince Mohammed bin Salman does this charm offensive tour which 0:20:19.080 --> 0:20:23.440 is under underway right now. How much support with respect 0:20:23.560 --> 0:20:26.640 to sort of a backdrop of bureaucrats behind him does 0:20:26.680 --> 0:20:28.600 he have and sort of you know, is he is 0:20:28.640 --> 0:20:32.000 he engendering support politically at home, and he's engendering support, 0:20:32.040 --> 0:20:36.240 but also obviously he's engendering resistance because change brings winners 0:20:36.280 --> 0:20:39.480 and losers. So you know, there are there are there 0:20:39.480 --> 0:20:41.919 are there are losers within the royal family, there are 0:20:41.920 --> 0:20:44.960 losers in the religious class um, and there are losers 0:20:44.960 --> 0:20:47.800 within the business community. So that all you know, there 0:20:47.800 --> 0:20:50.399 will be resistance, and there is resistance, but he seems 0:20:50.400 --> 0:20:53.879 to have really overwhelmed that resistance so that there is 0:20:53.920 --> 0:20:58.119 no public manifestation of any resistance. UM. And you know, 0:20:58.160 --> 0:21:03.240 he's a very determined and powerful personality and he's steamrolling 0:21:03.280 --> 0:21:06.400 everything through. Frankly, we look forward to speaking again. Thank 0:21:06.440 --> 0:21:09.360 you so much for coming in. Thank you Running Awash 0:21:09.760 --> 0:21:12.199 a h with us of course his book from a 0:21:12.240 --> 0:21:17.600 few years back. The Saudi Kingdom greatly appreciate his attendance 0:21:17.880 --> 0:21:34.520 this morning. Lisa Bramwinson, Tom Keenyan with us. He is 0:21:34.560 --> 0:21:37.639 the Chairman of the President's Council of Economic Advised as 0:21:37.640 --> 0:21:41.560 a gentleman from the University of Pennsylvania. Kevin Hassett, Dr Hassett, 0:21:41.560 --> 0:21:43.639 good morning. Oh, it's great to be her time. And 0:21:43.640 --> 0:21:45.480 if you don't call me Kevin, then I'm gonna have 0:21:45.480 --> 0:21:48.520 to get rough with you, Kevin, I'm gonna I I'm 0:21:48.560 --> 0:21:52.320 gonna give you a massive victory lap. Here. Three quarter 0:21:52.600 --> 0:21:56.479 moving average of g d P is a Hassett trump 0:21:56.560 --> 0:22:00.399 like three point one percent there is. The capital ending 0:22:00.520 --> 0:22:05.320 is soaring, just like we said, right, Kevin, you know 0:22:05.400 --> 0:22:07.920 I'm I'm equal opportunity. I'll tear in a viral part 0:22:07.960 --> 0:22:10.119 when i have to, and I'll give him credit when 0:22:10.160 --> 0:22:15.439 it's there. You are delivering three g d P. Everybody 0:22:15.480 --> 0:22:19.120 on the street says we're gonna ebb in fade as 0:22:19.160 --> 0:22:22.720 we move forward, push against that. How do we sustain 0:22:23.240 --> 0:22:28.560 hass GDP has GDP, I don't know it's Americans GDP. 0:22:28.720 --> 0:22:32.200 But what's going to happen this year is that there's 0:22:32.240 --> 0:22:35.760 going to be a surgeon capital formation that is a 0:22:35.840 --> 0:22:39.200 supply side push that drives growth higher without putting upward 0:22:39.240 --> 0:22:42.479 pressure on prices. And the capital formation is already visible 0:22:42.520 --> 0:22:45.639 in the advanced durables data. And it's a massive turnaround 0:22:45.680 --> 0:22:48.040 from what happened at the end of the Obama administration. 0:22:48.119 --> 0:22:51.800 Because at the end of the Obama administration in capital 0:22:51.840 --> 0:22:54.600