WEBVTT - Surveillance: China's Engagement Positive For EM, Spence Says 0:00:00.080 --> 0:00:12.960 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 0:00:13.480 --> 0:00:17.560 Daily we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.240 Bloomberg dot Com, and of course on the Bloomberg. Well. 0:00:32.280 --> 0:00:35.840 An extraordinary day in Washington yesterday. I like what um 0:00:35.880 --> 0:00:39.080 Axio says this morning, Jim vander High talking about American 0:00:39.159 --> 0:00:42.800 politics Off the rails? Are Kevin surreally in Washington? Really 0:00:42.880 --> 0:00:46.960 seconding that? The mystery of where we are to Thursday 0:00:47.159 --> 0:00:51.040 with Judge Kavanaugh and the Deputy Attorney General as well. 0:00:51.280 --> 0:00:53.520 We will stay focused on one of the great themes. 0:00:53.520 --> 0:00:56.080 And we have a wonderful guest John this morning to 0:00:56.120 --> 0:01:00.000 begin this conversation on our trade war, on our terror, 0:01:00.760 --> 0:01:03.440 on our taxes, which I think is another word for tariffs. 0:01:03.480 --> 0:01:06.520 Have I studied my Spence over the years. He is 0:01:06.560 --> 0:01:09.360 Michael Spence of New York University and of course of 0:01:09.440 --> 0:01:12.480 Laurea where the Acre Loft and Stiglets and a glorious 0:01:12.840 --> 0:01:14.959 your What was it like to get on stage with 0:01:15.080 --> 0:01:20.200 Acer Laft and Stiglets, were you guys on speaking terms? Oh? Absolutely, yeah, No, 0:01:20.280 --> 0:01:23.119 we don't each other for years and been colleagues at 0:01:23.160 --> 0:01:27.280 Harvard or Stanford. In my case with Joe um No, 0:01:27.520 --> 0:01:31.200 it was a joyful occasion. It's a joyful occation right now, 0:01:31.360 --> 0:01:35.400 President ge and uh Mr Trump, President Trump keeping up 0:01:35.480 --> 0:01:37.960 good face. But the fact is, is your grievous rifts 0:01:38.040 --> 0:01:43.280 between China in America. What is your observation of the 0:01:43.400 --> 0:01:46.440 choice set, the set of ideas that the president has 0:01:46.600 --> 0:01:51.520 right now? Well, you know, there's considerable debate about that, 0:01:51.560 --> 0:01:53.960 but it looks like what the President in a fairly 0:01:54.000 --> 0:01:59.080 confrontational ways renegotiating the terms of engagement with China and 0:01:59.160 --> 0:02:02.800 other countries. Professor, is always great to get your insight 0:02:02.880 --> 0:02:05.040 on things, and we're while aware that you also serve 0:02:05.080 --> 0:02:07.880 as a consultant and advisor to some really big asset 0:02:07.880 --> 0:02:11.240 managers like PIMCO. What are you telling them right now? 0:02:11.240 --> 0:02:14.560 What are you advising them about the vulnerabilities emerging markets 0:02:14.800 --> 0:02:16.760 off the back of this try dispute between the United 0:02:16.760 --> 0:02:22.280 States and China. Well, there's considerable uncertainty about um the 0:02:22.320 --> 0:02:27.079 impact that of the of the of the confrontation between 0:02:27.080 --> 0:02:29.920 the United States and China on the emerging economies. And 0:02:30.000 --> 0:02:32.160 I think the reason for that is it's just simply 0:02:32.200 --> 0:02:35.239 too hard to figure out, or there's if you drew 0:02:35.280 --> 0:02:37.639 a decision tree, there's too many branches on it to 0:02:37.720 --> 0:02:40.600 kind of get to the end. But but it's certainly 0:02:40.600 --> 0:02:45.560 true that the emerging economies have gotten themselves out of balance, 0:02:46.000 --> 0:02:50.760 uh in the post crisis period with you know, things 0:02:50.800 --> 0:02:53.840 that I at least thought were you know, mistakes that 0:02:53.880 --> 0:02:56.680 wouldn't be made again, like borrowing and her and currency, 0:02:56.840 --> 0:03:01.280 running large current account deficits, et cetera. Uh um, And 0:03:01.320 --> 0:03:04.480 I was wrong about that. So there's some rebalancing. I 0:03:04.800 --> 0:03:08.760 don't think it's it's it's fatal at this point, whether 0:03:09.720 --> 0:03:11.520 you know that. One of the reasons it's hard to 0:03:11.560 --> 0:03:14.040 figure out what the longer term effects are is one 0:03:14.080 --> 0:03:17.680 of China's objectives is to be a positive influence in 0:03:17.720 --> 0:03:20.880 the developing world. That's part of their game plan of 0:03:20.960 --> 0:03:25.360 becoming a more influential country um our nation around the world. 0:03:25.440 --> 0:03:27.760 And and so they're well on the way to doing that, 0:03:27.919 --> 0:03:31.200 and China's engagement in terms of investment and other things 0:03:31.240 --> 0:03:35.200 could could be um, you know, pretty positive, and a 0:03:35.200 --> 0:03:37.720 lot of emerging economies, well, the ways they sort of 0:03:37.760 --> 0:03:40.400 optimistic time out there at the moment, Professor, that might 0:03:40.440 --> 0:03:43.000 be China shifts towards an easing boss and an easing 0:03:43.000 --> 0:03:46.360 boss which could stimulate the emerging world. Do you have 0:03:46.440 --> 0:03:50.240 that confidence? Do you share that optimism? Um? I think 0:03:50.320 --> 0:03:53.240 it's there's some easing that's likely in the cards as 0:03:53.280 --> 0:03:55.880 they try to buffer their economy. But that but for 0:03:55.920 --> 0:04:01.240 the emerging economies, access to their technologies, like the digital technologies, 0:04:01.240 --> 0:04:04.640 which are very advanced in China, access to the Chinese 0:04:04.680 --> 0:04:07.880 market are really crucial things. So I think there's justified 0:04:08.520 --> 0:04:13.520 optimism based on China's longer term objectives. Um, whether the 0:04:13.640 --> 0:04:19.040 easing the short term, you know kind of monetary and 0:04:19.120 --> 0:04:23.440 fiscal responses are particularly positive free ms, I'm not so sure. 0:04:23.640 --> 0:04:27.600 You are an important insight professor on television. I want 0:04:27.640 --> 0:04:29.560 to advance that forward on the radio. We've got the 0:04:29.600 --> 0:04:33.320 advantage of doing that on a radio. In hindsight, which 0:04:33.400 --> 0:04:37.400 is that we've gone awfully far in our multilateral world 0:04:37.720 --> 0:04:42.800 and people are rebelling against the multilateral outcome. Did we 0:04:42.839 --> 0:04:47.760 go too far? In a way? I think we did. Um. 0:04:47.760 --> 0:04:51.240 You know, Danny Roderick is a very knowledgeable commentator on this, 0:04:51.320 --> 0:04:53.400 and what Danny says is that for most of the 0:04:53.440 --> 0:04:56.200 period where the GAT was the sort of the evolving 0:04:56.240 --> 0:05:02.920 government structure. Um the principle was nations agreed provided it 0:05:02.960 --> 0:05:05.840 looked like it was broadly beneficial by their own values 0:05:05.880 --> 0:05:09.240 and standards. And at some point he associates it with 0:05:09.360 --> 0:05:13.920 the ascendency of the w t O coming into existence, 0:05:14.760 --> 0:05:18.560 the global the rules in the of the system became 0:05:18.720 --> 0:05:23.479 you know, inviolable, and then countries had to adapt, you know, 0:05:23.560 --> 0:05:25.480 to a system we agreed on, but you didn't get 0:05:25.480 --> 0:05:28.200 the tinker with that with that system. And I think 0:05:28.839 --> 0:05:31.560 that's the sense in which is how he would put 0:05:31.640 --> 0:05:34.440 the proposition that we went too far. This is critical 0:05:34.440 --> 0:05:37.160 because Danny Roderick and Brad DeLong I would also put 0:05:37.200 --> 0:05:40.279 in this group have looked carefully at the bargain we 0:05:40.400 --> 0:05:43.600 made and we didn't follow through on, and that we 0:05:43.720 --> 0:05:47.719 said for labor that was crushed by international trade, we 0:05:47.760 --> 0:05:51.560 would provide domestic support, and we didn't do that out 0:05:51.560 --> 0:05:55.159 of NAFTA and frankly out of other trade agreements. If 0:05:55.200 --> 0:05:58.719 that's a missing link, is there any political tone to 0:05:58.880 --> 0:06:04.040 help labor it's crushed by the advantage, the societal advantages 0:06:04.080 --> 0:06:07.600 of international trade. I don't see it. I don't see 0:06:07.600 --> 0:06:12.160 any political oomph to help out retail or to help 0:06:12.200 --> 0:06:17.360 out UH textile workers in in the Carolinas. I think 0:06:17.400 --> 0:06:22.039 that's a fair observation. Tom. You know, I suspect we 0:06:22.120 --> 0:06:27.080 may see a change in that UM if a large 0:06:27.120 --> 0:06:30.360 contingent of Democrats get elected in the mid term elections, 0:06:30.400 --> 0:06:33.279 because this is this kind of thing is clearly on 0:06:33.360 --> 0:06:35.880 their agenda, and and we may go too far in 0:06:35.920 --> 0:06:39.440 the other direction, UM and start knucking up market performance. 0:06:39.480 --> 0:06:42.599 But but I think what you said is right. There's 0:06:42.600 --> 0:06:44.279 been a lot of talk, but not a lot of 0:06:44.320 --> 0:06:46.800 action on that front. Well, we gonna have to leave 0:06:46.800 --> 0:06:48.920 it there. Michael Spence, thank you so much. The Laura 0:06:49.040 --> 0:06:52.239 from New York University. I really can't say enough about 0:06:52.880 --> 0:06:55.600 his work and Project Syndicate. I've made very clear through 0:06:55.640 --> 0:06:59.479 the crisis, his essays have been crucial to making us 0:06:59.560 --> 0:07:03.120 think for there on where we are within the crisis 0:07:03.240 --> 0:07:19.240 and beyond. Right now Christopher Rone speaks to us was fatiguous, Chris, 0:07:19.280 --> 0:07:22.240 there's like eight ways to go, always within technical analysis. 0:07:22.480 --> 0:07:25.400 But your call on oil is so important. We have 0:07:25.480 --> 0:07:28.320 to start with that. How do you determine a breakout? 0:07:28.400 --> 0:07:30.920 You have a rising trend? I get that, But then 0:07:31.080 --> 0:07:34.040 how do you know that the breakout is there? Well, 0:07:34.040 --> 0:07:36.080 we have to put this in context of the trend, 0:07:36.120 --> 0:07:38.120 like you say, Tom, and let's remember the last six 0:07:38.200 --> 0:07:41.920 or seven months. Even as oil consolidated, it consolidated from 0:07:41.920 --> 0:07:45.280 the benefit of an uptrend. Oil sideways for six or 0:07:45.280 --> 0:07:48.280 seven months above the upward sloping Tuitter day moving average. 0:07:48.280 --> 0:07:51.960 So we are inclined to believe the validity of this 0:07:52.080 --> 0:07:55.480 breakout getting up through brand. We think low nineties maybe 0:07:55.880 --> 0:08:02.280 the next target. Here talk in technological talk, what momentum means. 0:08:03.040 --> 0:08:06.400 I've never understood that. You know, Rowe goals, I'm ving 0:08:06.440 --> 0:08:10.160 all the other Newtonian mv we have. What does momentum mean? 0:08:10.280 --> 0:08:14.800 The chart people, momentum uh clearly is an academic term. 0:08:14.840 --> 0:08:19.160 As technicians we call it trend. It's simply rate of change. 0:08:19.720 --> 0:08:22.840 I think when you look back at different factors that 0:08:22.920 --> 0:08:26.240 have been proven to work over time, momentum is the 0:08:26.240 --> 0:08:28.840 most reliable of those. What we know about momentum is 0:08:28.840 --> 0:08:30.920 it's very mean learning in the short term, right, It's 0:08:31.000 --> 0:08:33.120 very random in the short term, but very powerful over 0:08:33.160 --> 0:08:36.400 the longer term. John, what's so important about this? John Farrell? 0:08:36.600 --> 0:08:40.480 Is chrisop Ron nailed that, and that the trend is 0:08:40.679 --> 0:08:45.280 your drift function. It's your momentum, not a further inertial 0:08:45.400 --> 0:08:48.640 force from the trend. That's to me where a lot 0:08:48.720 --> 0:08:51.280 of people get this wrong. Was that enough physics, John? 0:08:51.440 --> 0:08:54.400 That was really impressive. Tom, Thank you, thank you. Can 0:08:54.440 --> 0:08:56.520 we get to just how this old market has really 0:08:56.600 --> 0:08:59.280 changed Chris in the last several years. Several years ago 0:08:59.440 --> 0:09:02.400 someone told me think about the oil market as if 0:09:02.400 --> 0:09:04.760 it has a ceiling, that once we get to sixty 0:09:04.840 --> 0:09:07.920 sixty five, the crude comes online in the United States 0:09:07.960 --> 0:09:10.240 and it drives prices lower. And now I'm just hearing 0:09:10.280 --> 0:09:13.000 think about the crude market with a floor. We have 0:09:13.040 --> 0:09:15.120 a supply risk story in the market. Now, how has 0:09:15.120 --> 0:09:17.120 it changed that much? Why has it changed that much 0:09:17.120 --> 0:09:19.760 in just a couple of years. Yeah, I would make 0:09:19.760 --> 0:09:22.040 maybe two or three observations. I would say number one, 0:09:22.559 --> 0:09:25.800 the idea that crude had a ceiling on it in 0:09:25.880 --> 0:09:28.160 the mid sixties or low seventies, I think became a 0:09:28.240 --> 0:09:30.319 very very consensus view. And as we know, what do 0:09:30.480 --> 0:09:33.120 markets like to do, they like to challenge consensus views. 0:09:33.520 --> 0:09:39.120 I think the big change from when oil was under 0:09:39.160 --> 0:09:42.320 a lot of pressure that was a credit driven move. 0:09:42.400 --> 0:09:44.400 If you look at energy sector credit, it was under 0:09:44.520 --> 0:09:47.280 lots and lots of pressure uh during that two or 0:09:47.320 --> 0:09:50.320 three year period. That has been different over the last 0:09:50.360 --> 0:09:53.239 eighteen months. Even though the energy stocks haven't been fantastic, 0:09:53.280 --> 0:09:57.840 we haven't seen the systemic risk emerge from energy credit. 0:09:57.960 --> 0:10:01.600 I think that's a very important distinguishing factor. You've had energy. 0:10:01.679 --> 0:10:04.440 How yield spreads actually make new loads this week. I 0:10:04.480 --> 0:10:07.760 think that is support of both for oil price itself 0:10:08.080 --> 0:10:11.320 and for the energy stocks in particular. So you believe 0:10:11.360 --> 0:10:13.559 there's discipline in the credit market now, Chris, that was 0:10:13.600 --> 0:10:16.040 absent a couple of years ago. It certainly reflects that. 0:10:16.160 --> 0:10:18.320 And at the end of the day, I am very 0:10:18.360 --> 0:10:22.480 reluctant to embrace the equities when credit conditions are weakening. 0:10:22.720 --> 0:10:26.000 So I certainly welcome the improvement that we've seen, most 0:10:26.040 --> 0:10:28.360 notably over the last six months. Even as oil was 0:10:28.400 --> 0:10:31.959 consolidating this year, credit conditions were still stable. That is 0:10:32.000 --> 0:10:34.240 an asset for the stocks. Let's go back to the 0:10:34.240 --> 0:10:37.720 equity markets and the fundamental people will notice the narrowness 0:10:37.760 --> 0:10:41.040 of the market, only selected stocks really doing well. How 0:10:41.040 --> 0:10:44.040 do you fold that into technical analysis? You look at sectors, 0:10:44.320 --> 0:10:47.240 you look at individual charts. But how do you take 0:10:47.440 --> 0:10:52.480 the Apple Amazon effect into what you're doing? Tom? I 0:10:52.480 --> 0:10:54.040 have to say I think that's one of the most 0:10:54.200 --> 0:10:59.200 overstated fallacies of two thousand and ten. This market is 0:10:59.240 --> 0:11:02.040 not as narrow as commonly described. Let me give you 0:11:02.080 --> 0:11:04.920 three iterations of the SPS. We know the cap weighted 0:11:05.040 --> 0:11:07.199 SMP is at new highs. That's the index we look 0:11:07.200 --> 0:11:10.400 at every day. Well, the equally weighted SMP is also 0:11:10.480 --> 0:11:14.360 at new highs, as is the reverse weighted SMP. So 0:11:14.440 --> 0:11:17.320 if all your large weights Apple, Amazon, Facebook become your 0:11:17.360 --> 0:11:20.200 smallest weights, that index is still making new high so 0:11:20.520 --> 0:11:24.160 it's difficult for me to buy. The market is dangerously 0:11:24.280 --> 0:11:28.160 narrow story when all these different iterations of the index 0:11:28.200 --> 0:11:30.640 are actually making new highs. And what we did recently 0:11:30.960 --> 0:11:34.080 we looked at a distribution of Russell one thousand returns 0:11:34.120 --> 0:11:37.400 by market cap. Believe it or not, it's the second 0:11:37.440 --> 0:11:40.120 and third quintiles, the belly of the market that has 0:11:40.200 --> 0:11:43.240 actually outperformed this year. So that is not where you 0:11:43.280 --> 0:11:46.560 find your biggest stock. So I think this story, Um 0:11:46.840 --> 0:11:49.280 that it's only four or five names leading this market 0:11:49.720 --> 0:11:51.960 is just partently false. Chris, for anyone that might have 0:11:51.960 --> 0:11:53.800 missed what you just said. Are you essentially saying that 0:11:53.880 --> 0:11:56.120 if you make every single stock on the SMP five 0:11:56.200 --> 0:11:59.240 hundred had exactly the same contribution to the overall index 0:11:59.559 --> 0:12:02.400 as the next stalk that disanquity markets, that a record high. 0:12:02.440 --> 0:12:04.720 Yes it is. And even if you take it one better, 0:12:05.160 --> 0:12:08.240 if you make Apple, Amazon, Facebook, Google, JP Morgan your 0:12:08.280 --> 0:12:11.640 smallest weights, um, the SMP is still at an all 0:12:11.720 --> 0:12:14.400 time high. So this idea that it's narrow, I I 0:12:14.520 --> 0:12:16.760 just think it is not supported by the facts. Tom. 0:12:16.800 --> 0:12:19.120 I don't think people recognize that. I don't have many 0:12:19.120 --> 0:12:20.599 people come on this show with us at least and 0:12:20.640 --> 0:12:23.240 say that, did I No, I don't think so. I 0:12:23.960 --> 0:12:26.680 think that you know. The hallmark of what Chris is 0:12:26.720 --> 0:12:30.440 doing is just go through the data, go through the sectors. 0:12:30.520 --> 0:12:33.360 Where's the anomaly right now? Where's the distinction within the 0:12:33.440 --> 0:12:36.240 thirty page power point? Did you do? I think what's 0:12:36.280 --> 0:12:40.720 most timely right here, perhaps and maybe most underappreciated, is 0:12:40.920 --> 0:12:43.360 the extent to which the industrial stocks have improved over 0:12:43.360 --> 0:12:46.679 the last three months. You have big bell weather names, 0:12:46.679 --> 0:12:50.680 whether it's Caterpillar or Bowing, or Emerson Electric or Parker Hanaffan, 0:12:51.120 --> 0:12:54.760 that has meaningful that have meaningfully improved over the last 0:12:54.840 --> 0:12:57.480 ninety days. I think that is underappreciated here by a 0:12:57.520 --> 0:12:59.840 lot of investors. I mean that's critical because these are 0:13:00.040 --> 0:13:03.720 not you know, fifteen price to sales, eight times cash flow, 0:13:04.320 --> 0:13:07.120 you know, thirteen times eve Dost stocks. They're like, there's 0:13:07.160 --> 0:13:11.719 still are they They're not cheap, right, but I think 0:13:11.720 --> 0:13:14.439 they're Caterpillar at one point this year was trading six 0:13:14.520 --> 0:13:16.800 or seven times forward arting. So just to put it 0:13:16.840 --> 0:13:18.640 in a little bit of context, and you think about 0:13:18.679 --> 0:13:21.240 some of these names, at one point or another in 0:13:21.400 --> 0:13:25.319 two thousand eighteen, all of those stocks have been correlated 0:13:25.320 --> 0:13:27.360 to the emerging market trade. So the fact that they 0:13:27.360 --> 0:13:29.560 have botted and turn up, does that tell us that 0:13:29.640 --> 0:13:32.000 maybe e M is poised to improve. You're a little 0:13:32.000 --> 0:13:34.160 bit something to think about going forward. Christopher Wrong, Thank 0:13:34.160 --> 0:13:36.839 you so much for strtigaus research today. Just important work, 0:13:36.880 --> 0:13:50.439 particularly that I thought an oil to ninety barreled. There 0:13:50.520 --> 0:13:54.280 is Facebook, there is Instagram, and then there's Sarah Ponza 0:13:54.520 --> 0:13:57.520 with a combination of these two. And it's not only 0:13:57.559 --> 0:14:00.920 two guys from Instagram leaving. A lot of are leaving 0:14:00.960 --> 0:14:04.160 Facebook right right. It is quite a shake up at Facebook. 0:14:04.200 --> 0:14:07.040 But what's really standing out is Instagram because Instagram has 0:14:07.040 --> 0:14:09.800 just been such a growing area for Facebook and it 0:14:09.840 --> 0:14:12.960 has become more and more important. So people are saying that, Okay, well, 0:14:13.000 --> 0:14:15.480 if the CEOs or the founders I mean of Instagram 0:14:15.480 --> 0:14:18.120 are now leaving, what does that mean for the importance 0:14:18.120 --> 0:14:21.720 of Instagram going forward for Facebook? But either way, Facebook 0:14:21.800 --> 0:14:23.920 is down to percent this morning, so we'll have to 0:14:23.920 --> 0:14:27.120 see more going forward. Sticking in the same type of space, 0:14:27.160 --> 0:14:29.320 if you look at Square, it's a mobile payment company. 0:14:29.440 --> 0:14:31.080 This is run by Jack Dorsey, who of course is 0:14:31.120 --> 0:14:34.160 also the CEO of Twitter. Square is actually up two 0:14:34.160 --> 0:14:36.080 and a half percent this morning. Now. An analyst over 0:14:36.120 --> 0:14:38.920 at Namura Incident put out a note saying, well, Square 0:14:38.920 --> 0:14:41.760 should probably be the newest member of the fan complex. 0:14:42.000 --> 0:14:46.000 The analysts also raises Chrice Target. Yeah, so adding Facebook, 0:14:46.080 --> 0:14:50.000 adding Amazon, Netflix, Google, So they're saying that it's shaken 0:14:50.040 --> 0:14:52.080 up space. It should be in there anyways, helping the price. 0:14:52.080 --> 0:14:54.600 We've got a Scena, so one of the retailers that 0:14:54.680 --> 0:14:57.920 owns brands including dress bar And and and Taylor Loft Justice. 0:14:57.960 --> 0:15:00.560 Those brands might be better known ven A Sena, but 0:15:00.600 --> 0:15:03.440 the stock is up eighteen percent today. After reporting killer 0:15:03.480 --> 0:15:06.520 earnings yesterday after the close that beat estimates. They also 0:15:06.560 --> 0:15:09.440 had its first comparable sales growth in three years, and 0:15:09.480 --> 0:15:11.600 then til rate. It's been in the news the past 0:15:11.680 --> 0:15:14.160 week or so, up sixteen percent, well until Ray this 0:15:14.200 --> 0:15:18.000 morning said it's successfully exported medical marijuana to Australia to 0:15:18.000 --> 0:15:20.680 distribute to children who suffered from epilepsy. So it was 0:15:20.720 --> 0:15:22.680 down the past three days. Investors are using this to 0:15:22.760 --> 0:15:24.880 snap those losses get into the stock. Hillery up six 0:15:25.040 --> 0:15:27.400 percent this morning. A few upgrades and downgrades for you 0:15:27.600 --> 0:15:29.960 work Eva now. This is a company that provides cloud 0:15:29.960 --> 0:15:32.760 and mobile software. It's based out of Iowa. Up fourteen 0:15:32.760 --> 0:15:35.840 percent after it was upgraded at Bear to an outperform. 0:15:35.960 --> 0:15:39.320 Science Applications International also known as s A i C. 0:15:39.840 --> 0:15:42.840 This is an enterprise technology company, upgraded to a buy 0:15:42.920 --> 0:15:46.400 from hold at Jeffrey's. It is down one percent actually, 0:15:46.440 --> 0:15:49.520 and Heritage Crystal Cleaning cleaning services company. It was upgraded 0:15:49.520 --> 0:15:52.920 to an outperformed from neutral at Beard as well. Thank you. 0:16:05.600 --> 0:16:09.280 Joining us now is Patrick Gregory of Bloomberg Law. He 0:16:09.360 --> 0:16:12.040 covers the Supreme Court for his Patrick you know, with 0:16:12.080 --> 0:16:15.080 all of this back and forth over the nomination of 0:16:15.200 --> 0:16:18.560 Brent Kavanaugh. It's possible to forget that the Supreme Court 0:16:18.840 --> 0:16:22.240 is going to be open for business in October, and 0:16:22.280 --> 0:16:24.280 I'm wondering if you could tell us what is on 0:16:24.320 --> 0:16:28.160 the docket and what should we be looking for. Well, um, 0:16:28.200 --> 0:16:31.240 that's true. And even Thursday, we're gonna get some orders 0:16:31.280 --> 0:16:34.920 and cases that could grant review or deny review in 0:16:34.960 --> 0:16:38.560 some important cases. One case I'm covering involves a high 0:16:38.560 --> 0:16:41.160 school coach who was praying on a football field and 0:16:41.320 --> 0:16:43.840 was suspended for that. So that's the case the court 0:16:43.880 --> 0:16:47.160 could grant review in and then uh, in October. It's 0:16:47.160 --> 0:16:49.960 really gonna be It's not, um, a whole lot of 0:16:49.960 --> 0:16:53.120 hot button issues. UM need October term. But we'll have 0:16:53.200 --> 0:16:56.040 to see alright, So not a lot of hot button issues. 0:16:56.080 --> 0:16:58.920 So does it matter then whether the Supreme Court has 0:16:58.920 --> 0:17:02.600 a full complement of justices? Um, of course it matters 0:17:02.600 --> 0:17:05.600 to the parties involved into some extent. But I would 0:17:05.640 --> 0:17:07.760 I would say that the real deadline here is going 0:17:07.800 --> 0:17:12.959 to be November midterms. Why is that Well, because if 0:17:13.040 --> 0:17:16.280 Kavanaugh doesn't get confirmed, you look at that scenario and 0:17:16.440 --> 0:17:20.800 you could really have, um, the Democratic voters be galvanized 0:17:20.880 --> 0:17:24.919 by a chance to block block the nominee. What do 0:17:24.960 --> 0:17:26.840 they do with the next nominee? I mean, I don't 0:17:26.840 --> 0:17:29.040 want to, you know, create a news flow here and 0:17:29.280 --> 0:17:32.359 then Mr Kavanaugh. You know, I saw one person sayd 0:17:32.400 --> 0:17:35.840 I believe he's innocent until proved guilty. But assuming Mr 0:17:35.960 --> 0:17:40.080 Kavanaugh in some form steps aside, what would you presume 0:17:40.160 --> 0:17:43.000 from the next nominee? I mean, is the is the 0:17:43.040 --> 0:17:48.360 process forever changed? I think we are certainly in new 0:17:48.480 --> 0:17:51.000 territory here, and that's why a lot of people say 0:17:51.000 --> 0:17:54.400 that there will be pressure on the president to appoint 0:17:54.760 --> 0:17:57.800 a woman, and there are a number of qualified women 0:17:57.920 --> 0:18:00.280 on his Supreme Court shortlist. A lot of people are 0:18:00.320 --> 0:18:02.480 talking about Amy Barrett and there, and there are a 0:18:02.480 --> 0:18:06.080 couple of others. As far as the cases that you 0:18:06.240 --> 0:18:10.320 described that the Supreme Court will be hearing, are they 0:18:10.440 --> 0:18:15.239 able to put off important or contentious cases until they 0:18:15.280 --> 0:18:18.159 get a full complement of justice. They have a lot 0:18:18.240 --> 0:18:21.320 of freedom over over when they schedule oral arguments and 0:18:21.359 --> 0:18:26.200 things like that. So sure, again, looking at the Supreme 0:18:26.240 --> 0:18:30.280 Court and the retiring judges is well, I mean, it's 0:18:30.880 --> 0:18:33.280 it might right that in the history of the Court, 0:18:33.920 --> 0:18:37.399 this is an exceptionally fluid moment in terms of not 0:18:37.560 --> 0:18:40.960 only bodies coming in such as Judge Kavanaugh, but also 0:18:41.040 --> 0:18:43.879 the idea of what retirements could be just in the 0:18:43.920 --> 0:18:48.919 next twelve months. Absolutely, you know, Ruth Bader Ginsburg is 0:18:48.960 --> 0:18:52.200 certainly getting up there in terms of years plants. Thomas 0:18:52.240 --> 0:18:54.200 has been on the Court since I was a kid, 0:18:54.880 --> 0:18:57.560 and yeah, it's you know, who knows what could happen. 0:18:57.720 --> 0:19:00.159 There could be another vacancy there and we just don't now. 0:19:00.359 --> 0:19:02.879 I'll thank you so much, Patrick, We greatly appreciate that 0:19:02.920 --> 0:19:16.000 in the Supreme Court. Pim Fox in time came from 0:19:16.000 --> 0:19:19.840 the Bloomberg Interactive Broker studios in New York. It is 0:19:19.920 --> 0:19:23.760 five thousand three or miles south out of New York, 0:19:23.800 --> 0:19:28.080 out of JFK or Newark, and you wander across Venezuela. 0:19:28.160 --> 0:19:32.440 Then you really wander across the Amazon in Brazil down 0:19:32.480 --> 0:19:35.880 to Argentina. If you're lucky, you're on American Airlines flight. 0:19:37.119 --> 0:19:40.119 And nobody has done this in Bloomberg more than Eric Shatzka, 0:19:40.280 --> 0:19:44.200 who has spent major time in Buenos Areas. I want 0:19:44.240 --> 0:19:46.800 to talk about the Central Bank resignation in your interview 0:19:46.880 --> 0:19:49.400 yesterday with Mr MacRae, where I know he was managing 0:19:49.720 --> 0:19:52.600 the message and that how are the people of Buenos 0:19:52.640 --> 0:19:55.560 Aires and Argentina doing? I mean, they're the ones living 0:19:55.600 --> 0:19:58.520 this crisis. Pay so out right now thirty eight point 0:19:58.600 --> 0:20:01.440 six four, We're gonna make another dash to forty. How 0:20:01.440 --> 0:20:06.320 are the people of Argentina doing? Uh? With difficulty? It's 0:20:06.359 --> 0:20:10.160 like tangible right. Inflation tom is at the highest level 0:20:10.600 --> 0:20:15.520 in Macari's presidency. The last monthly figure was almost thirty 0:20:17.160 --> 0:20:21.560 and it's heading up. Inflation is getting worse better, The 0:20:21.560 --> 0:20:25.480 economy is getting worse before it's getting better. The best 0:20:25.640 --> 0:20:29.040 Mr Macri could do was to say that he was 0:20:29.080 --> 0:20:32.040 hopeful the thanks to the weakness and the pay so 0:20:32.400 --> 0:20:35.680 and the juice that it's giving exports, the Argentine economy 0:20:35.800 --> 0:20:39.159 might start turning around, might come out of recession in 0:20:39.200 --> 0:20:42.760 the second quarter of twenty But didn't. They just imposed 0:20:42.800 --> 0:20:47.440 tariffs on exports of wheat and soybeans. There are some 0:20:48.160 --> 0:20:53.360 he calls them temporary emergency export taxes, but those are 0:20:53.400 --> 0:20:58.720 being put in place to try and restore a budgetary balance. 0:20:59.520 --> 0:21:02.959 This is you know, he is fighting fires. It's like 0:21:03.080 --> 0:21:05.000 it's like being in the midst of It's like being 0:21:05.000 --> 0:21:07.960 in the rockies. This summer right there, wildfires everywhere you look. 0:21:08.200 --> 0:21:10.639 Before we get to the central banker, what does Madame 0:21:10.720 --> 0:21:12.760 Legarde in the I m F want They're going to 0:21:12.840 --> 0:21:15.159 write a big check. President Trump will say America is 0:21:15.200 --> 0:21:18.000 writing a check. Is a conduit through I am And 0:21:18.040 --> 0:21:20.159 to your point, Macary said that he has had a 0:21:20.160 --> 0:21:23.719 lot of support. This wouldn't be happening without American support. 0:21:23.760 --> 0:21:27.680 That goes without saying, of course, but that wants to 0:21:27.720 --> 0:21:30.960 get dinner Daniels tonight, what I want to know, Eric is, 0:21:31.200 --> 0:21:33.840 and this is critical, what does the I m F 0:21:34.040 --> 0:21:40.960 want this time around of the Argentinean crisis? What's the 0:21:41.000 --> 0:21:43.359 I m F. What What we learned yesterday in the 0:21:43.400 --> 0:21:47.520 conversation that I had with Macary on television and we 0:21:47.640 --> 0:21:50.480 subsequently had with him for an additional half an hour 0:21:50.600 --> 0:21:53.520 behind the scenes on the record, I should add, is 0:21:53.560 --> 0:21:56.720 that this agreement that he is talking about, this new 0:21:56.760 --> 0:21:59.000 agreement with the I m F, which in theory is 0:21:59.040 --> 0:22:02.119 going to span the size of the program from fifty 0:22:02.119 --> 0:22:05.720 billion to something else and accelerate disbursements from the fund 0:22:05.720 --> 0:22:09.880 to Argentina, is going to involve a change in monetary policy. 0:22:09.920 --> 0:22:13.800 Tom would and maybe this gets us to Luis Caputo 0:22:13.920 --> 0:22:18.240 resigning from the central banking Argentina. Would Argentina be changing 0:22:18.280 --> 0:22:20.960 the way that it manages the economy on its own 0:22:21.480 --> 0:22:24.560 or is this a stipulation? I think it's reasonable to ask, 0:22:24.600 --> 0:22:31.400 if not, to conclude this stipulation didn't go there? Are 0:22:31.400 --> 0:22:34.960 you going there and saying this is a stipulation from who? Investors? 0:22:35.119 --> 0:22:37.960 Or I am f Well, what Macari told us yesterday 0:22:38.280 --> 0:22:40.520 the report and again this was I have to emphasize 0:22:40.560 --> 0:22:42.800 this was not on television. He did talk about a 0:22:42.880 --> 0:22:46.280 change in monetary policy coming, He didn't go into a 0:22:46.320 --> 0:22:50.800 lot of detail. He said subsequently that the central bank 0:22:50.840 --> 0:22:55.200 needs to revamp these are his words, revamped monetary policy, 0:22:55.240 --> 0:22:58.760 that the explanation for this would be coming in several weeks. 0:22:58.800 --> 0:23:02.800 But there was a wreck ignition that manipulating a single 0:23:02.880 --> 0:23:08.000 interest rate was not effectively managing the Argentine economy. Is 0:23:08.040 --> 0:23:11.040 this a conclusion that Louis Caputo came to on his own? 0:23:11.080 --> 0:23:14.760 Remember this is an independent central bank ostensibly. Was this 0:23:14.840 --> 0:23:19.000 a conclusion that Federico Sturtzenegger, his predecessor who stepped down 0:23:19.920 --> 0:23:22.240 three months ago. Did he stepped out of his own volition? 0:23:22.920 --> 0:23:27.200