WEBVTT - Junk ETFs Are Favorite Trading Partner to Exploit: John McClain 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg P and L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg P M L 0:00:20.840 --> 0:00:29.880 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. There's 0:00:29.880 --> 0:00:33.360 been a lot of concern about the three trillion dollar 0:00:33.720 --> 0:00:37.640 one trillion dollar junk bond market in the US for 0:00:37.640 --> 0:00:40.000 a number of years. This year, however, it has been 0:00:40.080 --> 0:00:43.080 out performing. Our next guest joins us to talk about that, 0:00:43.200 --> 0:00:47.559 John McClean, portfolio manager at Diamond Hill. John, I want 0:00:47.600 --> 0:00:49.760 to start with that because there's been a lot of 0:00:49.760 --> 0:00:53.800 concern about riskier assets this year, certainly volatility picking up, 0:00:54.120 --> 0:00:58.040 and yet the high old market has been significantly outperforming 0:00:58.280 --> 0:01:00.959 higher rated debt. What do you make of that? Well, 0:01:01.000 --> 0:01:03.200 I think it's uh, the credit spread that you have 0:01:03.360 --> 0:01:07.959 in in high yield is uh still reasonably attractive for 0:01:08.200 --> 0:01:13.959 the default rate expectations going forward. Uh, So you have 0:01:14.480 --> 0:01:17.080 UM you know with this case, you also have less 0:01:17.120 --> 0:01:20.520 interest rate sensitivity UM with with high yield, and so 0:01:20.920 --> 0:01:23.800 I think if people are worried about the markets, I'd 0:01:23.840 --> 0:01:26.160 first be a little bit more worried about equities as 0:01:26.280 --> 0:01:28.839 as opposed to high yield. When we talk about high yield, 0:01:28.840 --> 0:01:30.800 should we get specific and talk about some of the 0:01:30.920 --> 0:01:35.320 energy areas like oil, natural gas? I mean, because weren't 0:01:35.360 --> 0:01:38.920 they really the big focus of high you lending? Uh? Yeah, 0:01:38.920 --> 0:01:42.680 I mean that was definitely the story in sixteen. Um, 0:01:42.720 --> 0:01:46.280 I think the market has sharpened its pencil and understands 0:01:46.360 --> 0:01:50.400 where good assets are and where weaker assets are. And uh, 0:01:50.600 --> 0:01:53.080 from our viewpoint, you want to be concentrated in the 0:01:53.080 --> 0:01:57.720 Permian basin. And uh, you know, at this point, companies 0:01:57.760 --> 0:02:00.400 have right size their balance sheets. Uh. You know, I 0:02:00.400 --> 0:02:02.880 think we've seen all the distress kind of moved through. 0:02:03.640 --> 0:02:06.960 And uh, with the commodity environment where it is, particularly 0:02:06.960 --> 0:02:10.480 in oil, uh you know, around sixty bocks. Uh, that's 0:02:10.520 --> 0:02:13.079 pretty constructive for for a lot of the high yield 0:02:13.120 --> 0:02:15.000 issuers right now, all right, I want to talk a 0:02:15.040 --> 0:02:17.080 little bit about some of the sinkholes that we're seeing. 0:02:17.120 --> 0:02:20.959 For example, Community Health. Uh, yesterday it was rumored that 0:02:21.160 --> 0:02:25.400 it is going to hire advisors to restructure its debt 0:02:25.680 --> 0:02:28.760 and its bonds sunk. This sort of feeds on an 0:02:28.760 --> 0:02:32.960 ongoing slump in healthcare related junk bonds. Is this scenario 0:02:33.000 --> 0:02:36.080 where you see opportunity or that you want to avoid 0:02:36.120 --> 0:02:39.119 like a plague? Yeah, I'd probably see the latter. Uh. 0:02:40.120 --> 0:02:44.680 We are certainly underweight healthcare in general, and UH community 0:02:44.760 --> 0:02:49.520 specifically has a very tough path on a go forward basis. 0:02:49.520 --> 0:02:51.840 We don't really like the assets and we think that 0:02:51.919 --> 0:02:55.720 it has an untenable debt load. So I do believe 0:02:55.720 --> 0:02:59.360 a restructuring could occur U and could occur it seemingly 0:02:59.480 --> 0:03:03.080 faster than and the market has anticipated. Another name that 0:03:03.160 --> 0:03:06.720 caught my eye Valiant. This is a company with twenty 0:03:06.760 --> 0:03:09.960 seven billion dollars of debt. It just sold more bonds 0:03:10.000 --> 0:03:12.919 and there were plenty of buyers. Evidently were you among them? 0:03:13.000 --> 0:03:15.880 And do you view this as a sign that the 0:03:16.000 --> 0:03:19.959 pendulum has swung back to issuers in the high bond market. Well, 0:03:20.400 --> 0:03:22.919 we were not. And the coupon that they had to 0:03:22.960 --> 0:03:25.440 pay at nine and a quarter was pretty expensive relative 0:03:25.520 --> 0:03:28.320 to the market, yielding a little north of six percent. 0:03:28.480 --> 0:03:30.960 So uh, you know, they're in a position right now 0:03:31.000 --> 0:03:33.720 again with a with a very weakend. Uh, they have 0:03:33.800 --> 0:03:35.480 to continue to kick the can down the road and 0:03:35.480 --> 0:03:38.560 their interest costs continue to move higher. I don't think 0:03:38.560 --> 0:03:43.120 a deal is traded particularly well. Um, So you know, 0:03:43.240 --> 0:03:46.920 I think that one is certainly a wait and see story. 0:03:47.200 --> 0:03:50.560 Tell me about Sprint and they're going back to the 0:03:50.600 --> 0:03:54.560 market for more money and they using spectrum as collateral. 0:03:54.600 --> 0:03:57.320 You're kind of laughing a little bit here. Why we 0:03:57.480 --> 0:03:59.240 kind of put that in the too hard pile. It's 0:03:59.320 --> 0:04:02.080 it's very hard to you know, set a set a 0:04:02.080 --> 0:04:05.760 true valuation around what that spectrum is worth. So if 0:04:05.800 --> 0:04:07.960 we can't analyze and understand it, we're not going to 0:04:08.040 --> 0:04:11.200 commit capital to it. What about the e t F 0:04:11.440 --> 0:04:14.400 involvement in the high old bond market, there has been 0:04:14.400 --> 0:04:18.160 a sort of bifurcation between bonds that are included in 0:04:18.279 --> 0:04:20.200 the high yield bond e t f s and those 0:04:20.240 --> 0:04:22.599 that have not. How much do you sort of play 0:04:22.680 --> 0:04:25.440 that space and try to focus on bonds that are 0:04:25.480 --> 0:04:28.159 either in the e t F s or out of them. Yeah, 0:04:28.200 --> 0:04:29.839 I mean the e t f s are favorite trading 0:04:29.880 --> 0:04:33.320 counterparty Lisa UM. What does that mean? You have a 0:04:33.320 --> 0:04:37.960 technical buyer or seller, and they're typically buyers into strengthen 0:04:38.040 --> 0:04:41.680 sellers into weakness. UM. So for us, that is certainly 0:04:41.680 --> 0:04:45.200 an opportunity that we can exploit in the market, um 0:04:45.360 --> 0:04:49.520 by providing them the liquidity that they provide to their customers. 0:04:49.800 --> 0:04:51.280 So I think the E t f s and high 0:04:51.320 --> 0:04:54.040 yield are kind of a victim of their own success. Uh. 0:04:54.080 --> 0:04:57.920 They've been sold as liquidity, not as alpha. And uh, 0:04:58.000 --> 0:05:00.839 you know, I would say that if you look at 0:05:00.880 --> 0:05:04.480 their performance over any reasonable period of time, their bottom 0:05:04.520 --> 0:05:08.400 quartile performers. And uh. You know, with equity markets, you 0:05:08.440 --> 0:05:11.800 have cheap beta, and if you look at the expense 0:05:12.160 --> 0:05:15.200 ratios on the on these relative to true active management, 0:05:15.520 --> 0:05:19.000 you're not really getting a big break there. Tell me 0:05:19.040 --> 0:05:21.520 about private equity companies in their role in buying up 0:05:21.560 --> 0:05:24.320 how yield debt? What have you seen right now? Ah, 0:05:24.400 --> 0:05:27.000 there continues to be a swath of capital in in 0:05:27.120 --> 0:05:29.880 private equity, So uh, you know, I would continue to 0:05:30.200 --> 0:05:34.120 think that we will see more on the LBO front. Um. 0:05:34.240 --> 0:05:36.440 It's just how much leverage you can put on companies. 0:05:36.880 --> 0:05:39.799 So I'm wondering you said initially you expect the default 0:05:39.880 --> 0:05:43.039 rate to remain low, John, what are you looking at 0:05:43.080 --> 0:05:46.640 in particular to signal that the tide is turning? Because 0:05:46.680 --> 0:05:49.000 this is sort of the key question that everybody turns 0:05:49.040 --> 0:05:51.239 to when they talk about strength and risk your assets. 0:05:52.760 --> 0:05:57.000 I mean, we're looking at underlying economic data and growth 0:05:57.040 --> 0:06:00.640 seems to be here. Unemployment rates continue to be very low. 0:06:01.080 --> 0:06:03.920 You know, it is a strong labor force right now. 0:06:04.080 --> 0:06:07.640 So uh, you know, again, we we remained pretty constructive 0:06:07.680 --> 0:06:11.800 on the fundamentals of the US economy and with high yield, 0:06:12.040 --> 0:06:18.320 roughly of revenues are generated domestically. Netflix interested in buying 0:06:18.360 --> 0:06:20.640 Netflix debt? They've certainly got a lot of it at 0:06:20.640 --> 0:06:23.800 a certain price, absolutely a price. Uh you know, I 0:06:23.839 --> 0:06:26.960 would say with Netflix, Um, you know, we would look 0:06:27.040 --> 0:06:31.080 to where they were issuing that several years ago. Um, 0:06:31.120 --> 0:06:33.200 you know, if you could get a high fives uh 0:06:33.240 --> 0:06:36.080 six percent kind of coupon on a name, I think 0:06:36.120 --> 0:06:38.120 that would be very attractive. Now, what will we see that? 0:06:38.480 --> 0:06:41.680 I don't believe so. Um, but you look at the 0:06:42.000 --> 0:06:45.240 content library itself covers the debt there, so it's a 0:06:45.279 --> 0:06:49.640 company you can believe in the equity market capitalization. That's 0:06:49.640 --> 0:06:52.200 a that's a huge margin of safety for US. Which 0:06:52.240 --> 0:06:55.599 companies in this sort of triple B sphere, the lowest 0:06:55.720 --> 0:07:03.680 rated investment grade tier are you watching for a potential downgrade? Uh? Yeah, 0:07:03.720 --> 0:07:06.840 that's a difficult one right now. It's not a particular 0:07:06.920 --> 0:07:10.280 area of the market that that we're really focused on. Um, 0:07:10.320 --> 0:07:13.320 you know, I think we'll we'll continue to see uh 0:07:13.360 --> 0:07:16.880 you know some fallen angels like a Teva um you know, 0:07:16.920 --> 0:07:19.800 where you have large scale M and A that doesn't 0:07:19.840 --> 0:07:23.000 work out. But there's nobody particularly on my radar right now, 0:07:23.480 --> 0:07:26.280 toys r Us tell me about any Were you involved 0:07:26.280 --> 0:07:29.440 with any of that? No, that was the train wreck 0:07:29.560 --> 0:07:33.720 we saw coming a mile away. What what what gave 0:07:33.760 --> 0:07:35.760 you that? I mean a lot of people obviously didn't 0:07:35.840 --> 0:07:37.320 see that train. They thought it was light at the 0:07:37.360 --> 0:07:39.640 end of the tunnel. When's the last time you've been 0:07:39.640 --> 0:07:41.960 to a Toys r Us? Basically, Like it was basically 0:07:42.120 --> 0:07:44.200 something as basic as that you run it. You talk 0:07:44.240 --> 0:07:46.720 amongst yourselves at the at the firm, say, we don't 0:07:46.720 --> 0:07:49.440 even do this ourselves. Yeah, that's certainly a part of it. 0:07:49.560 --> 0:07:52.680 And uh, you know they are, they were saddled with 0:07:52.720 --> 0:07:55.720 too much debt and uh you know, their competitors were 0:07:55.760 --> 0:07:58.240 taking market share for a long period of time. So 0:07:58.320 --> 0:08:00.480 it was something that uh, you know, we felt like 0:08:00.520 --> 0:08:02.640 we could see well in advance. I want to thank 0:08:02.640 --> 0:08:05.240 you very much for being with us. John McClean is 0:08:05.320 --> 0:08:09.160 portfolio manager for Diamond Hill Investment Group, helping to manage 0:08:09.320 --> 0:08:13.640 more than twenty two billion dollars based in Columbus, Ohio. 0:08:13.720 --> 0:08:24.920 Although Mr McClean hills from the great state of Kentucky, 0:08:28.600 --> 0:08:32.240 factory work and the industrialization of the world. It has 0:08:32.280 --> 0:08:36.840 attracted political pundits, but it also has now attracted a 0:08:36.840 --> 0:08:40.320 analysis by Joshua Freeman. He is a distinguished Professor of 0:08:40.360 --> 0:08:43.760 history at Queen's College and the Graduate Center of the 0:08:43.840 --> 0:08:46.720 City University of New York of Cuney, and his book 0:08:46.880 --> 0:08:50.160 is entitled Behemoth, a History of the Factory and the 0:08:50.280 --> 0:08:53.240 Making of the Modern World. And he joins us here 0:08:53.240 --> 0:08:55.880 in our eleven three oh studios. Professor Freeman, thank you 0:08:55.960 --> 0:08:58.240 very much for being here. First, tell us why did 0:08:58.280 --> 0:09:01.320 you decide to write this book? Well, you know, I 0:09:01.360 --> 0:09:04.160 was what caught my attention was in two thousand and 0:09:04.240 --> 0:09:07.320 ten when there was a sudden bursts of attention to 0:09:07.400 --> 0:09:11.000 Fox con because there was some suicides of its workers 0:09:11.040 --> 0:09:13.920 jumping off the roofs. And this this got, you know, attention, 0:09:13.960 --> 0:09:17.079 and what que my make maker of iPhone products, maker 0:09:17.120 --> 0:09:19.760 of iPhone you know, and biggest and not just iPhone, 0:09:19.800 --> 0:09:23.040 but Samsung and many, many different things. And what caught 0:09:23.080 --> 0:09:24.800 my eye was the size of the factory. It had 0:09:24.800 --> 0:09:27.520 two hundred and fifty thou workers and as in a story, 0:09:27.559 --> 0:09:29.920 and this was mind blowing. This company I had barely 0:09:29.920 --> 0:09:32.960 ever heard of. And I started thinking, you know, are 0:09:33.000 --> 0:09:38.560 their precedence for this kind of outsized establishment? And you know, 0:09:38.600 --> 0:09:40.559 I thought, well, yeah, they kind of are, and that 0:09:40.679 --> 0:09:43.960 in each era for three hundred years now they have 0:09:44.040 --> 0:09:47.320 been kind of cunning edge establishments that have been the 0:09:47.360 --> 0:09:52.040 templates for the future and have captured public attention, you know, 0:09:52.320 --> 0:09:56.160 because they've become carriers for debates about, you know, what 0:09:56.240 --> 0:09:59.640 our future should look like, you know, what system should 0:09:59.679 --> 0:10:02.800 we have. So that's what it got me into this book. 0:10:02.840 --> 0:10:05.720 I thought, let me do some case studies that start 0:10:05.800 --> 0:10:08.719 with the earliest English factories and in with Fox coun 0:10:09.120 --> 0:10:12.440 One of the brilliant things about the way you framed 0:10:12.480 --> 0:10:17.000 this was looking at factories as disruptors, not sort of 0:10:17.480 --> 0:10:21.000 moments of nostalgia that people want to get back to. 0:10:21.280 --> 0:10:23.360 Can you give us a sense of kind of how 0:10:23.400 --> 0:10:25.560 you did that, what you were thinking, Well, you know, 0:10:25.640 --> 0:10:28.480 I think in the States right now, we look at 0:10:28.520 --> 0:10:31.079 decline and abandonment so much. But you know, I want 0:10:31.120 --> 0:10:34.319 to tell the story when these things were sources of wonderment, 0:10:34.679 --> 0:10:37.040 when these were new things under the sun, that they 0:10:37.120 --> 0:10:42.000 represented these great breakthroughs in human ingenuity and capacity and 0:10:42.040 --> 0:10:44.600 also frankly, human misery at the same time. You know, 0:10:44.600 --> 0:10:48.120 they're all linked together. Um. And what I found over 0:10:48.160 --> 0:10:51.960 and over again was the observers saw them this way 0:10:52.000 --> 0:10:55.079 almost immediately, whether it was in in eighteenth century England, 0:10:55.520 --> 0:10:58.520 or the people that flooded into tour the Ford Factory 0:10:59.080 --> 0:11:03.120 in the nineteenth nineteen twenties, UM, or the photographers who 0:11:03.200 --> 0:11:06.880 celebrateed Soviet factories, that there's a great sense that this 0:11:07.080 --> 0:11:10.760 was some vision of what the new society was going 0:11:10.800 --> 0:11:14.959 to be like. Maybe described for listeners what it would 0:11:15.040 --> 0:11:18.720 be like if you were to enter a factory that, 0:11:19.200 --> 0:11:21.800 let's say, operated in the United States, a textile mill, 0:11:21.880 --> 0:11:25.640 for example, around the turn of the previous century. Well, 0:11:26.360 --> 0:11:29.240 you know, if you were going into a textile mill 0:11:29.440 --> 0:11:33.360 in the early days of textile manufacturing, uh, probably you 0:11:33.400 --> 0:11:36.400 were coming from the country or rural life. And first 0:11:36.400 --> 0:11:38.439 of all, you've probably rarely ever seen so many people 0:11:38.480 --> 0:11:40.880 in one place or such a large building. You know, 0:11:40.960 --> 0:11:43.200 even just going in a five story building was a 0:11:43.200 --> 0:11:46.560 new thing. Then it was loud. You know, there's all 0:11:46.640 --> 0:11:49.800 this machinery, weaving machinery you know has has you know, 0:11:49.880 --> 0:11:52.360 throws back and forth the shell sixty times a second. 0:11:52.520 --> 0:11:56.040 You couldn't hear anything. It's stunk because you know, they 0:11:56.040 --> 0:11:58.760 were this before oil. They were using whale oil and 0:11:58.840 --> 0:12:01.800 animal grease. UM. And there were all these workers, and 0:12:01.880 --> 0:12:05.080 yet it was all being coordinated. It was all in 0:12:05.240 --> 0:12:07.440 one with them, the whole thing, the people in the 0:12:07.520 --> 0:12:11.640 machinery was one enterprise. UM. In the best of the factors, 0:12:11.679 --> 0:12:14.840 you might see pretty nice looking young women mostly you know, 0:12:14.880 --> 0:12:18.040 we came from New England farms. Uh. In the worst 0:12:18.080 --> 0:12:21.440 of the factories, you'd see child labor looking pretty darning, 0:12:21.520 --> 0:12:25.200 miserable and starved. So, Josh, let's connect this to now, 0:12:25.400 --> 0:12:28.880 because we hear a lot about bringing manufacturing back to 0:12:28.960 --> 0:12:32.680 the US, keeping uh some of these assembly line and 0:12:32.760 --> 0:12:37.720 production jobs in America. And I'm wondering, what moment in 0:12:37.920 --> 0:12:42.600 time are politicians talking about this looking at what which 0:12:42.679 --> 0:12:45.600 which era of manufacturing do they want to bring back? 0:12:45.600 --> 0:12:49.160 And what's that tell us about our moment right now? Uh? 0:12:49.480 --> 0:12:52.240 In humanity? Well, I think the nostalgia, if you want 0:12:52.280 --> 0:12:56.480 to call that, uh, the the the make America great again. 0:12:56.559 --> 0:12:58.520 I think people are thinking really about the fifties and 0:12:58.559 --> 0:13:01.080 the sixties. Uh. And this was an era when you 0:13:01.120 --> 0:13:05.680 had the height of American manufacturing industry and unionization, which 0:13:05.760 --> 0:13:10.600 meant that the the tremendous uh productivity lead to profits 0:13:10.679 --> 0:13:13.960 that were widely shared. So it's sustained a way of 0:13:14.040 --> 0:13:16.680 life of upward mobility for people who came out of 0:13:16.760 --> 0:13:19.760 high school, got a job in the local plant, did 0:13:19.800 --> 0:13:22.120 better than their parents, and knew the kids were going 0:13:22.200 --> 0:13:24.240 to do better than them. And I think that's the 0:13:24.280 --> 0:13:28.520 moment people look back to. You know, I'm not so 0:13:28.640 --> 0:13:32.440 sure of bringing a fox con plant as they operate 0:13:32.480 --> 0:13:35.400 in modern China is going to sustain that way of life. 0:13:35.840 --> 0:13:38.760 You know, Wisconsin just uh said it would spend three 0:13:38.760 --> 0:13:40.760 billion dollars to do that. It will be interesting to 0:13:40.800 --> 0:13:47.319 see what actually happens. You were not only uh analyzing 0:13:47.679 --> 0:13:52.520 historical precedent, but as Lisa brought up, current factories, factories 0:13:52.600 --> 0:13:55.760 in China, just give us a sense of the scale. Uh. 0:13:55.800 --> 0:13:58.560 And and there again, if we can draw us a 0:13:58.600 --> 0:14:02.120 picture their mind box, they're absolutely mindboggling you know fox 0:14:02.200 --> 0:14:04.920 KNT City, which was their big ascendion center, which is 0:14:04.920 --> 0:14:07.600 still operating, although there are many other plants. Uh. It 0:14:07.679 --> 0:14:11.200 takes an hour to walk across the complex. Um there 0:14:11.200 --> 0:14:13.800 are you know, something like two hundred three hundred thousand 0:14:13.800 --> 0:14:17.120 people there. Uh, seventy or eighty thousand of them live 0:14:17.160 --> 0:14:20.360 in dormitories. These are young Chinese people, mostly coming from 0:14:20.360 --> 0:14:25.600 the rural areas. Um. There's the factories themselves, which combine 0:14:25.720 --> 0:14:29.880 both very sophisticated production techniques and just very old fashioned 0:14:30.240 --> 0:14:35.040 assembly with people doing very fine putting together of small 0:14:35.080 --> 0:14:36.920 things to go into your phone or the mother boarder 0:14:36.920 --> 0:14:40.280 of your laptop. But it's surrounded by whole world. You know, 0:14:40.360 --> 0:14:44.480 there's everything from soccer fields to cyber cafes to wedding 0:14:44.600 --> 0:14:47.400 dress shops. You know. Uh. I think for a lot 0:14:47.440 --> 0:14:51.080 of young Chinese people this who are leaving behind, you know, 0:14:51.400 --> 0:14:55.080 less developed rural areas, this is an interlude that that 0:14:55.200 --> 0:14:59.040 that's difficult. The work itself is tough and boring, but 0:14:59.200 --> 0:15:02.960 also it was a glimpse into a more urban, cosmopolitan 0:15:02.960 --> 0:15:05.520 world before they go back to where they came from, 0:15:05.560 --> 0:15:08.000 which is what happens with most of these workers. What 0:15:08.080 --> 0:15:11.600 about pay well, it depends on what you measure it by. 0:15:11.720 --> 0:15:14.040 By U s stands, of course, it's very low. But 0:15:14.200 --> 0:15:16.320 pay in Southern china's gone up. There's been actually a 0:15:16.320 --> 0:15:18.720 big wave of strikes, which doesn't get much publicity in 0:15:18.720 --> 0:15:22.560 this country. That's pushed up wages and in fact, UH 0:15:22.600 --> 0:15:25.560 some companies, like there's a company that makes UH shoes 0:15:25.640 --> 0:15:29.520 for of Anka Trump's line, have begun building factors in 0:15:29.560 --> 0:15:32.680 Africa because pay rates in Southern China are now going 0:15:32.720 --> 0:15:36.960 up pretty quickly. So um, you know, UH, it's a 0:15:37.080 --> 0:15:40.360 very fluid situation and the cycle that we saw in 0:15:40.400 --> 0:15:43.400 the United States and elsewhere of you know, you build 0:15:43.400 --> 0:15:46.360 a new factory, it's innovative, but but at some point 0:15:46.360 --> 0:15:48.960 it gets eclipsed by by the newer version of it, 0:15:49.040 --> 0:15:52.880 and labor course another course go up, and then it closes. 0:15:53.120 --> 0:15:56.320 That cycle seems to be happening ever faster. It's it's 0:15:56.360 --> 0:15:58.920 just a fascinating issue. Thank you so much for joining us, 0:15:59.200 --> 0:16:02.880 really truly pleasure. Josh Freeman Distinguished Professor of History and 0:16:03.040 --> 0:16:06.640 author of Behemoth, History of the Factory and the Making 0:16:06.760 --> 0:16:09.040 of the Modern World. He is at Queen's College and 0:16:09.080 --> 0:16:12.280 the Graduate Center of the City University of New York, 0:16:12.560 --> 0:16:14.920 And it raises this question of, you know, can you 0:16:14.920 --> 0:16:18.560 ever focus on just recreating that one moment where it 0:16:18.600 --> 0:16:21.320 all works together and wages are rising and the jobs 0:16:21.360 --> 0:16:44.160 are still innovative going forward. The United Kingdom's Prime Minister, 0:16:44.240 --> 0:16:48.760 Theresa May expelling twenty three Russian diplomats to talk about 0:16:48.800 --> 0:16:53.560 this and other possible points of contention between the European Union, 0:16:53.640 --> 0:16:56.520 the UK, the United States and Russia. We want to 0:16:56.560 --> 0:16:59.960 bring in Toby Harshall, Bloomberg U national Security Editor. Tobe 0:17:00.200 --> 0:17:03.320 how much of a big deal is this? Um, It's 0:17:03.360 --> 0:17:05.880 both a big deal and not a big deal. UM. 0:17:06.240 --> 0:17:08.800 It's going to depend on exactly who the diplomats are. 0:17:08.880 --> 0:17:11.280 I think Theresa May is in front of Parliament right now. 0:17:12.000 --> 0:17:13.639 It may or may not come up. She's going to 0:17:13.680 --> 0:17:16.040 give a statement later in the day sort of with 0:17:16.160 --> 0:17:19.040 more details. I mean, this is this is all part 0:17:19.040 --> 0:17:21.960 of the game that they play. Um. We suspended, you know, 0:17:22.400 --> 0:17:25.800 under the Obama administration, we suspended Russian diplomats and we 0:17:25.840 --> 0:17:31.040 took over their their lovely shore house in Maryland. UM. 0:17:31.200 --> 0:17:34.280 And I don't think anyone truly it's more of a 0:17:34.320 --> 0:17:39.320 statement than it is actually messing up their their their embassy. Okay, 0:17:39.440 --> 0:17:43.360 so there was this nerve agent attack of a former 0:17:43.520 --> 0:17:48.640 Russian citizen. He was killed in the UK. Interest, Yes, 0:17:49.960 --> 0:17:53.320 hanging on, but they're hanging on. But they're both hanging on. Okay, 0:17:53.359 --> 0:17:58.399 great died overnight. But okay, um, Okay. How important is 0:17:58.440 --> 0:18:01.800 it that President Trump respond to this in support of 0:18:02.000 --> 0:18:06.720 the United Kingdom? Um? It's only important because it's President Trump. Um, 0:18:06.800 --> 0:18:09.720 because of you know, his statements during the campaign that 0:18:09.800 --> 0:18:11.240 led a lot of people to think he was going 0:18:11.280 --> 0:18:15.320 to be squishy on Russia. Um. He actually hasn't been. Um. 0:18:15.400 --> 0:18:19.320 They've been pretty tough on on Putin. Um since they have, 0:18:19.720 --> 0:18:23.760 since they've taken office, they upped sanctions, they've they're rhetoric 0:18:23.800 --> 0:18:26.159 has been pretty good. Um. But yeah, it would be 0:18:26.240 --> 0:18:30.119 nice to see him just add moral support. Toby, is 0:18:30.560 --> 0:18:34.679 this more about the optics and the headlines? Because I 0:18:34.720 --> 0:18:37.600 can't imagine, as horrible as it is, that this is 0:18:37.640 --> 0:18:41.280 a security threat to let's say, either the United Kingdom 0:18:41.840 --> 0:18:45.480 or to the United States. And I'm wondering whether this 0:18:45.560 --> 0:18:49.200 is in a sense of diversion of attention away from 0:18:49.400 --> 0:18:52.840 issues having to do with challenging air power in the 0:18:52.880 --> 0:18:57.320 Baltic sale of military hardware to Turkey and perhaps even 0:18:57.400 --> 0:19:02.400 undermining NATO. That's always a possibility. I'm gonna I'm gonna 0:19:02.400 --> 0:19:04.160 be the skunk at the garden party for a moment, 0:19:04.760 --> 0:19:08.320 for we don't actually have proof that Rushes behind this. UM. 0:19:08.359 --> 0:19:11.280 We strongly suspect for good reason that they were, so 0:19:11.359 --> 0:19:14.280 I don't want to get into their motivations behind it. UM. 0:19:14.880 --> 0:19:18.359 I don't think that anyone would would think this is 0:19:18.400 --> 0:19:20.640 gonna going to keep the attention off of their other 0:19:20.720 --> 0:19:23.240 nefarious doings for very long. In fact, I think it'll 0:19:23.240 --> 0:19:26.960 only add to the image of of of the Russians 0:19:27.000 --> 0:19:30.400 as as you know, being a huge problem. Okay, so 0:19:30.640 --> 0:19:33.800 let's say, okay, it hasn't been proven. Both individuals who 0:19:33.800 --> 0:19:36.080 are attacked with a nerve agent are are still hanging on, 0:19:36.119 --> 0:19:40.080 although they are critically ill. Uh. At the same time, 0:19:40.119 --> 0:19:44.000 Rex Tillerson came out in strong support the now former 0:19:44.280 --> 0:19:46.760 Secretary of State for the U S came out in 0:19:46.800 --> 0:19:50.240 strong support of Theresa May and the United Kingdom in 0:19:50.320 --> 0:19:53.479 their efforts to go after this. Whereas yesterday we heard 0:19:53.520 --> 0:19:56.080 President Trump waffle on the issue, saying, you know, well, 0:19:56.440 --> 0:19:58.879 we'll see what happens whether it's Russia or whoever else. 0:19:59.240 --> 0:20:02.719 I mean, this seems symbolically important. Are we reading too 0:20:02.800 --> 0:20:06.159 much into that? Um? I think in the US we 0:20:06.240 --> 0:20:09.520 maybe are. I mean, for the Brits to react like 0:20:09.560 --> 0:20:11.320 this is very much called for. I mean, this is 0:20:11.359 --> 0:20:15.000 an attack on their on their sovereign territory. Um. It's 0:20:15.040 --> 0:20:18.200 also you know, if Russians were behind it. Remember that 0:20:18.400 --> 0:20:21.440 some he was part of a prisoner swap. So this 0:20:21.520 --> 0:20:24.320 is breaking all the rules of the Cold War. Um. 0:20:24.520 --> 0:20:27.159 Once you're part of a prisoner swap, you're supposed to 0:20:27.200 --> 0:20:29.800 be clear. I mean, we're not going to go after 0:20:29.840 --> 0:20:31.800 the people that he was traded for and try and 0:20:31.920 --> 0:20:35.520 kill them. Um. It it's therefore, it's different than the 0:20:35.560 --> 0:20:39.280 previous poisoning case, UM, where the person was a defect, 0:20:39.320 --> 0:20:42.600 not a defector anymore, but had fled the Soviet Union 0:20:42.640 --> 0:20:46.080 and was living, you know, in quasi hiding. UM. It's 0:20:46.080 --> 0:20:49.399 no better to attack people with with nerve agents, UM, 0:20:49.480 --> 0:20:54.639 no matter their status. UM. But this is it's really strange, Toby. 0:20:54.920 --> 0:20:57.120 Let's just shift to the US and our own defense 0:20:57.480 --> 0:21:00.399 budget right now. What's the most important issue that should 0:21:00.440 --> 0:21:03.800 be before people's attention when it comes to spending over 0:21:03.840 --> 0:21:07.880 seven hundred and what sixty billion a year. I hate 0:21:07.880 --> 0:21:12.080 to say it, but it's actually UM pension and healthcare 0:21:12.119 --> 0:21:15.000 reform for for veterans. I don't think we can do 0:21:15.119 --> 0:21:18.840 much about that. For UM the current retirees. I mean, 0:21:18.880 --> 0:21:21.000 we made a promise to them. They put their lives 0:21:21.040 --> 0:21:23.919 on the line. UM. But I think we have to 0:21:23.920 --> 0:21:27.240 be much much tougher on UM. The people in the 0:21:27.280 --> 0:21:30.600 service and particularly new recruits and with disaffect things like 0:21:30.640 --> 0:21:36.680 the Veterans Administration. Yeah, that's a separate budget technically, UM, 0:21:36.680 --> 0:21:38.240 but I think there are a lot of savings to 0:21:38.240 --> 0:21:42.399 be done there. UM. The disability UM program in the 0:21:42.480 --> 0:21:45.520 v A is an absolute disaster. In fact, when they 0:21:45.560 --> 0:21:48.160 had the huge scandal about the waiting times a few 0:21:48.280 --> 0:21:51.240 years ago, UM, almost all of those people were not 0:21:51.359 --> 0:21:55.720 waiting to be admitted to a hospital. They were UM 0:21:55.760 --> 0:22:00.480 looking to have their disability claims reviewed and a larger 0:22:00.560 --> 0:22:04.680 monthly checks. So it wasn't it wasn't as horrible as 0:22:04.680 --> 0:22:07.160 it seemed. It was bad that there was this huge backlog, 0:22:07.400 --> 0:22:11.520 But the real problem is UM the people get you know, 0:22:12.720 --> 0:22:15.640 they're great, they were in the military, they're they're strong 0:22:15.880 --> 0:22:19.240 and capable people, and they get sort of sucked into 0:22:19.320 --> 0:22:23.080 this this this disability trap um, where there's not a 0:22:23.119 --> 0:22:25.800 good system to get them back in the workforce and 0:22:25.920 --> 0:22:28.879 it's sort of a subsistence living. Toby harsh thank you 0:22:28.880 --> 0:22:30.639 so much for being with us. As always, we love 0:22:30.680 --> 0:22:34.760 having you on. Toby Harshot Bloomberview, National Security editor, talking 0:22:34.840 --> 0:22:39.199 about the move the Teresa May announced today expelling twenty 0:22:39.240 --> 0:23:05.879 three Russian diplomats. Where are we in the real estate market? 0:23:06.119 --> 0:23:09.120 Cycle here to answer that question so that you can 0:23:09.160 --> 0:23:12.160 rest easy, as Scott Lawler, founder and chief executive officer 0:23:12.200 --> 0:23:15.320 of Waypoint Residential based in Connecticut, but here in our 0:23:15.359 --> 0:23:18.119 eleven three oh studios today in New York, Scott, I 0:23:18.119 --> 0:23:21.400 want to start with that question. But before we get 0:23:21.440 --> 0:23:25.120 into the answer, has the market in the US ever 0:23:25.200 --> 0:23:29.679 been more bifurcated between cities that have seen an explosion 0:23:29.800 --> 0:23:34.080