WEBVTT - How Instability in France May Impact Markets 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, podcasts, radio news. 0:00:11.920 --> 0:00:16.320 This is the Bloomberg Surveillance Podcast. Catch us live weekdays 0:00:16.360 --> 0:00:19.640 at seven am Eastern on Apple car Player, Android Auto 0:00:19.760 --> 0:00:23.080 with the Bloomberg Business App, Listen on demand wherever you 0:00:23.120 --> 0:00:26.119 get your podcasts, or watch us live on YouTube. 0:00:26.280 --> 0:00:28.080 We talk to a lot of folks at Charles Schwab. 0:00:28.160 --> 0:00:29.760 You know, a lot of smart people there helping us 0:00:29.760 --> 0:00:30.920 out thinking about these markets. 0:00:31.080 --> 0:00:33.080 One of them on the global space is Jeff Clientop. 0:00:33.120 --> 0:00:36.839 He's chief Global investment strategist, a Charles Schwab joints us 0:00:36.840 --> 0:00:38.519 here in a Bloomberg Interactive studio. 0:00:39.440 --> 0:00:40.440 Where's he in Florida? 0:00:40.520 --> 0:00:44.360 Or yeah, but he's a Nitney Lion's Florida, or he's 0:00:44.400 --> 0:00:45.000 all over the place. 0:00:45.120 --> 0:00:47.920 Jeff, thanks so much for joining us here in our studio. Hey, Jeff, 0:00:48.000 --> 0:00:50.000 we've been talking a lot about France today. You got 0:00:50.040 --> 0:00:52.000 some political issues over there that they're all trying to 0:00:52.000 --> 0:00:55.040 figure out here. You think about investment opportunities from a 0:00:55.120 --> 0:00:59.040 global perspective. When you talk to your Schwab clients these days, 0:00:59.040 --> 0:01:00.760 where do you tell them some of the best opportunities 0:01:00.800 --> 0:01:01.560 are globally. 0:01:01.760 --> 0:01:03.960 You know, I really like what I'm seeing in Europe. 0:01:04.120 --> 0:01:06.480 I like outside the US for twenty twenty five, And 0:01:06.520 --> 0:01:08.400 I know you see headlines that say what's going on 0:01:08.440 --> 0:01:10.200 in Europe and you think, wow, how could you like this? 0:01:10.280 --> 0:01:13.759 But look, we're likely to see accelerating global economic growth 0:01:14.120 --> 0:01:17.080 outside the US in China, and that means countries like 0:01:17.120 --> 0:01:20.039 France better economic growth next year than we saw last year. 0:01:20.040 --> 0:01:23.319 We've seen rolling recessions through many of these major economies 0:01:23.520 --> 0:01:26.520 over the last six quarters and earnings recessions as well. 0:01:26.800 --> 0:01:29.399 That's likely to change in twenty twenty five. So rising 0:01:29.440 --> 0:01:31.800 economic and earnings growth points me in the direction of 0:01:31.800 --> 0:01:34.119 some of these economies that are rebounding, like what we're 0:01:34.120 --> 0:01:34.840 seeing in Europe. 0:01:35.000 --> 0:01:35.280 Jueff. 0:01:35.360 --> 0:01:37.440 You know, if we're not going to find growth in 0:01:37.520 --> 0:01:40.160 the US where China and we know Europe is on it, 0:01:40.319 --> 0:01:42.160 you know what talk to us about emerging markets. I 0:01:42.200 --> 0:01:43.760 mean that's right in my wheelhouse. You know, I'm the 0:01:43.800 --> 0:01:47.120 Beichief emerging market strategist. Is that where you're looking for opportunities. 0:01:47.360 --> 0:01:49.760 Emerging markets may be a bright spot next year. A 0:01:49.760 --> 0:01:51.680 lot will depend on China, whether they get their act 0:01:51.720 --> 0:01:54.080 together on the right amount of stimulus and directed in 0:01:54.080 --> 0:01:57.080 the right areas. But one thing I'm interested in is 0:01:57.080 --> 0:01:59.400 if you take a look back to twenty sixteen, after 0:01:59.400 --> 0:02:01.880 Trump won the f time, what do we see performing 0:02:01.920 --> 0:02:04.920 well well US small cap stocks. Of course, obviously America 0:02:04.960 --> 0:02:08.280 first policies what performed the worst emerging markets. But what 0:02:08.400 --> 0:02:10.880 happened in the first year of Trump's term twenty seventeen 0:02:11.120 --> 0:02:14.680 the complete opposite. Chinese stocks were up fifty six percent 0:02:14.919 --> 0:02:18.120 in twenty seventeen, leading emerging markets to be up forty 0:02:18.160 --> 0:02:21.400 percent or so, and the worst performers were US small caps. 0:02:21.440 --> 0:02:25.240 So the reason that happened, Sure we got tariff' sure 0:02:25.240 --> 0:02:28.600 we got a lot of uncertainty around US economic policy, 0:02:28.760 --> 0:02:31.079 but what we got was better global economic growth, the 0:02:31.080 --> 0:02:32.919 same recipe WEC for twenty twenty five. 0:02:33.120 --> 0:02:35.600 So when we think about Europe, I guess, at least 0:02:35.600 --> 0:02:38.680 when I look at it, I see value, big discount 0:02:38.720 --> 0:02:40.840 evaluation relative to the S and P five hundred and 0:02:40.840 --> 0:02:42.880 the US. But I also see the risks of a 0:02:42.960 --> 0:02:47.040 value trap. They're cheap for a reason, they've got no technology, 0:02:46.919 --> 0:02:51.119 they're slower growth. So put that value trap risk into 0:02:51.120 --> 0:02:52.520 perspective for Europe. 0:02:52.720 --> 0:02:55.480 Yeah, if we continue to see the tech sector lead 0:02:55.760 --> 0:02:58.359 AI names lead over the course of the next year, 0:02:58.480 --> 0:03:02.040 then it's hard to see Europe really getting the benefit 0:03:02.040 --> 0:03:04.320 of those that valuation differential. But I think we're actually 0:03:04.360 --> 0:03:06.760 starting to see a shift towards leadership in other areas, 0:03:06.960 --> 0:03:09.600 like financials, the classic Great Cup beneficiary. In fact, in 0:03:09.639 --> 0:03:11.840 the second half of this year, financials have been outperforming 0:03:11.919 --> 0:03:14.240 tech in Europe and that's good to see, and I 0:03:14.240 --> 0:03:17.840 think that's critical. Getting that rotation is really important. And 0:03:17.960 --> 0:03:20.360 you know, when I think about different factors that I 0:03:20.400 --> 0:03:23.079 want to focus on next year, values one of those. 0:03:23.320 --> 0:03:25.079 Cash flow is one of those, and I just see 0:03:25.120 --> 0:03:26.920 that showing up better and better on my screens as 0:03:26.919 --> 0:03:27.560 I look at Europe. 0:03:27.600 --> 0:03:30.160 I mean, Jeff, you're mentioning financials, you're mentioning small caps. 0:03:30.160 --> 0:03:31.920 I mean, some of these sectors are up twenty twenty 0:03:31.960 --> 0:03:33.720 plus percent year tod eight, you know, so it's all 0:03:33.720 --> 0:03:36.120 about entry point right now. I love that you're focusing 0:03:36.160 --> 0:03:38.440 on factors because for me, it's been a carry story 0:03:38.440 --> 0:03:39.960 in a lot of our markets. You know, you're talking 0:03:40.000 --> 0:03:42.200 about a shift here though, from growth to value, a 0:03:42.200 --> 0:03:45.320 shift from growth to maybe quality. So what factors you're 0:03:45.320 --> 0:03:47.480 looking for? I mean, there is a difference between the two. 0:03:47.320 --> 0:03:49.480 Now, Yeah, there is and so you know, I think 0:03:49.840 --> 0:03:51.600 so I guess one of the examples I might give, 0:03:51.640 --> 0:03:53.880 and just looking at some of the differentials here when 0:03:53.880 --> 0:03:56.560 we talk about value, it isn't just sectors. I'd look 0:03:56.600 --> 0:03:59.080 at let's say Coke versus Nestle. This is just an example. 0:03:59.080 --> 0:04:01.720 I don't a recommendation on either, but Coke US company, 0:04:02.280 --> 0:04:05.000 Nestlee is Swiss company. They both sell the same products 0:04:05.040 --> 0:04:07.119 to the same people around the world, snacks and beverages, 0:04:07.280 --> 0:04:09.720 geographic footprints, about the same. Coke trades at a four 0:04:09.800 --> 0:04:15.119 pe premium to the Swiss Nestle, only because US investors, 0:04:15.160 --> 0:04:17.159 which make up the bulk of coke investors, are just 0:04:17.200 --> 0:04:20.760 more optimistic about everything than the Swiss investor, who's you know, 0:04:20.800 --> 0:04:23.560 just gone through a recession in Europe and a war 0:04:23.600 --> 0:04:24.159 on their border. 0:04:24.760 --> 0:04:27.640 Fixed income Where does how does that fit into your world? 0:04:27.760 --> 0:04:27.919 You know? 0:04:28.279 --> 0:04:30.680 Kathy Jones covers that primarily for US, but we see, 0:04:30.720 --> 0:04:33.479 you know, shorter durations makes some sense in the US. 0:04:33.640 --> 0:04:36.360 Outside the US, with accelerating global growth, expect to see 0:04:36.400 --> 0:04:40.080 steeper curves as those central banks continue to cut rates. 0:04:40.080 --> 0:04:42.520 I'd see maybe another five rate cuts by the European 0:04:42.560 --> 0:04:45.120 Central Bank, which historically has led to a rise in 0:04:45.120 --> 0:04:47.200 the price to earnings ratio, and that's maybe another way 0:04:47.240 --> 0:04:48.360 we get around that value trap. 0:04:48.520 --> 0:04:50.160 Jeff put on your options hat for me. I mean, 0:04:50.200 --> 0:04:52.440 we're looking at a VIX here at thirteen handle. I mean, 0:04:52.480 --> 0:04:54.880 come on, the markets are pricing in zero risk into 0:04:54.880 --> 0:04:56.880 the year end turn. I mean, what's up with that? 0:04:57.400 --> 0:04:59.680 Yeah, so you know the markets are playing that post 0:04:59.720 --> 0:05:02.240 election scenario rally, right. Every time we see a new 0:05:02.240 --> 0:05:05.000 administration come in, from election day to inauguration day, we 0:05:05.040 --> 0:05:08.800 see this low volatility almost surprisingly and arise in the markets. 0:05:08.920 --> 0:05:11.120 I think that's a different story as we get closer 0:05:11.160 --> 0:05:13.839 to January twentieth than inauguration day, where you've got the 0:05:13.839 --> 0:05:17.840 president with potential day one policies that could really stir 0:05:17.880 --> 0:05:19.159 things up a little bit. So I think as you 0:05:19.160 --> 0:05:21.920 look at options volatility, expect that to start baking in 0:05:22.000 --> 0:05:23.120 higher volatilities we get. 0:05:23.240 --> 0:05:24.919 Do you think it makes sense maybe to write some 0:05:24.960 --> 0:05:26.880 calls here, buy some puts, buy some protection taken what 0:05:26.920 --> 0:05:27.880 the market gives you. 0:05:27.760 --> 0:05:30.799 It might yeah, I mean, with the price of insuring 0:05:30.839 --> 0:05:33.039 against that somewhat low, I think it's probably something to 0:05:33.040 --> 0:05:35.080 look at in portfolios. If you've got a lot of exposure. 0:05:35.320 --> 0:05:37.960 Jeff, were just about a month removed from the US 0:05:38.040 --> 0:05:39.920 election here, did you and your team did you wake 0:05:39.960 --> 0:05:42.400 up the day after the election saying we need to 0:05:42.480 --> 0:05:43.680 change some of our outlooks. 0:05:43.680 --> 0:05:46.000 Are just some of our outlooks here? In terms of 0:05:46.000 --> 0:05:48.039 our global call, we did not. 0:05:48.880 --> 0:05:50.919 And one of the reasons was we were expecting to 0:05:50.960 --> 0:05:54.599 shift to greater global tariffs almost matter who won next year. 0:05:54.720 --> 0:05:56.240 One of the things I think that's interesting is if 0:05:56.240 --> 0:05:59.520 you look at all the tariffs that Trump has proposed, 0:06:00.000 --> 0:06:02.080 you could get a weighted average tariff right in the 0:06:02.160 --> 0:06:05.559 US of twenty six percent, up from two point six percent. Now, 0:06:06.080 --> 0:06:08.720 that's rivaling the smooth Haully tariffs of nineteen thirty and 0:06:08.760 --> 0:06:12.040 the Great Depression. But a more realistic scenario, I think 0:06:12.080 --> 0:06:14.520 the bite is probably not as bad as the bark. 0:06:14.680 --> 0:06:16.360 Maybe a rise of two and a half percent to 0:06:16.720 --> 0:06:19.200 ten percent weighted average tariffs in the US. The IMF 0:06:19.200 --> 0:06:21.640 and the recent World Economic outlook looked at that scenario, 0:06:21.760 --> 0:06:24.080 what would be a move to a ten percent across 0:06:24.120 --> 0:06:26.520 the board tariff mean it would only shave zero point 0:06:26.560 --> 0:06:29.640 one percent off of global growth next year, so still 0:06:29.640 --> 0:06:33.080 seeing intact a return to better economic performance and eernings 0:06:33.080 --> 0:06:34.240 performance outside the US. 0:06:34.480 --> 0:06:36.880 Jeff, you know, you gave that example of Neslie versus 0:06:36.920 --> 0:06:38.400 Coke a little bit earlier, and your head went to, 0:06:38.520 --> 0:06:40.839 you know, positioning in the underlying investor base. Mine goes to, 0:06:40.920 --> 0:06:43.640 you know, those businesses themselves and where they located, right 0:06:43.680 --> 0:06:45.360 and the actual currency risk there. And so I look 0:06:45.360 --> 0:06:47.120 at the Bloomberg Spot Dollar Index and I see it 0:06:47.160 --> 0:06:48.960 up five and a half percent year today, and I 0:06:48.960 --> 0:06:51.360 think to myself, just how much runway is left for 0:06:51.440 --> 0:06:52.080 dollar strength? 0:06:52.440 --> 0:06:53.760 Are you focused on that at all? 0:06:53.880 --> 0:06:55.479 We are, so we're looking at the dollars. So we 0:06:55.560 --> 0:06:58.200 had a view. This maybe is one way our view change. 0:06:58.240 --> 0:07:00.719 We were looking for a weeker dollar in twenty five 0:07:00.720 --> 0:07:03.440 and now maybe seeing the dollar retaining its strength in 0:07:03.480 --> 0:07:06.280 twenty twenty five on the back of these potential tariff threats. 0:07:06.279 --> 0:07:08.760 I mean that's the textbook reaction company. Put a country 0:07:08.800 --> 0:07:11.040 puts on a tariff, the currency tends to rise by 0:07:11.040 --> 0:07:13.080 the amount of that tariff. So that could be a 0:07:13.120 --> 0:07:15.400 factor already in the market. Pricing in a five percent 0:07:15.520 --> 0:07:18.000 rise in tariffs. I think that's probably realistic. Maybe we 0:07:18.040 --> 0:07:20.040 don't see much more beyond that, but maybe a more 0:07:20.040 --> 0:07:21.400 stable dollar next year in. 0:07:21.360 --> 0:07:24.520 Your global remit, Jeff, how do you think about Latin America. 0:07:25.040 --> 0:07:27.760 You know, Latin America is still primarily a commodity based 0:07:27.840 --> 0:07:29.720 part of the world, and so if we do see 0:07:29.720 --> 0:07:32.440 a rise in manufacturing activity, we're starting to see some 0:07:32.480 --> 0:07:35.160 signs of that. China's PMI ticked up a little bit here. 0:07:35.440 --> 0:07:38.640 Maybe more commodity demand helps to support those Latin American economies, 0:07:38.680 --> 0:07:39.840 but that's really crucial there. 0:07:40.040 --> 0:07:40.960 What do you think about Japan? 0:07:41.000 --> 0:07:42.480 I mean, let's go around the world here, right, I mean, 0:07:42.480 --> 0:07:44.520 we saw a pretty big stimulus package last week, we 0:07:44.600 --> 0:07:46.520 got the nineteenth coming up. I think the boj is 0:07:46.560 --> 0:07:48.440 expected to hike rates. I mean, what do you think about, 0:07:48.480 --> 0:07:51.320 you know, investing in Japan Japanese equity specifically. 0:07:50.760 --> 0:07:53.000 I really like it. I think capital could start coming 0:07:53.040 --> 0:07:55.440 back to Japan in a significant way as you start 0:07:55.440 --> 0:07:57.600 to see the currency now beginning to appreciate a little 0:07:57.600 --> 0:07:59.000 bit more. I think, you know, as we got through 0:07:59.000 --> 0:08:01.680 this little bubble here around the election, I think you 0:08:01.720 --> 0:08:03.600 start to see the end go up, the cost of 0:08:03.640 --> 0:08:06.600 borrowing in yen going up, and that's critical to the 0:08:06.640 --> 0:08:09.360 rest of the carry trade. Yeah, yeah, moving that back in. 0:08:09.480 --> 0:08:11.600 Remember part of that carriy trade on winding was really 0:08:11.600 --> 0:08:14.320 around futures that unwound for the most part. But all 0:08:14.400 --> 0:08:19.320 the borrowing in yend from Japanese banks there's a trillion 0:08:19.320 --> 0:08:21.640 of it according to the Bank for International Settlements. That's 0:08:21.680 --> 0:08:23.760 probably still going to get repatriated at least some of 0:08:23.800 --> 0:08:25.760 it over the course of the next year. So consider 0:08:25.760 --> 0:08:27.680 that a rising tide for Japanese equities as well. 0:08:28.240 --> 0:08:31.080 Where are you telling your clients to stay away? Where 0:08:31.080 --> 0:08:33.120 are some aspects that you just don't like it. 0:08:33.320 --> 0:08:36.720 I'm still worried about China not delivering enough, over promising 0:08:36.760 --> 0:08:39.480 and under delivering on stimulus. So while valuations are very 0:08:39.520 --> 0:08:41.520 low and we know they can bounce whenever there's a 0:08:41.520 --> 0:08:44.680 new stimulus announcement, I'm still more attracted to other emerging 0:08:44.679 --> 0:08:46.840 and developed markets than I am in the Chinese equity market. 0:08:47.120 --> 0:08:49.240 Now, are you on up to two point six percent 0:08:49.280 --> 0:08:51.680 this year? Stage a pretty sharp post election rally that 0:08:51.720 --> 0:08:54.080 means weaker ran Nimbi talk to us a little bit 0:08:54.080 --> 0:08:57.559 about property structor weakness there about more importantly Chinese deflation, 0:08:57.640 --> 0:08:59.600 whether you expect it to persist as we head into 0:08:59.600 --> 0:08:59.960 the new year. 0:09:00.240 --> 0:09:02.720 Oh yeah, this is this is the biggest problem there 0:09:02.800 --> 0:09:05.240 and I don't see that turning ground anytime soon. Again, 0:09:05.360 --> 0:09:07.840 just not delivering stimulus. President she is still focused on 0:09:07.880 --> 0:09:13.439 strategic initiatives, semiconductor self sufficiency, a green tech self sufficiency, 0:09:13.520 --> 0:09:16.400 and not really focusing on delivering stimulus to the consumer 0:09:16.520 --> 0:09:18.120 or a housing doesn't want to see capital go back 0:09:18.120 --> 0:09:22.280 in as it investible. I think with a long enough 0:09:22.280 --> 0:09:25.080 time horizon it is. But watch out, twenty twenty five 0:09:25.120 --> 0:09:26.560 made up rule the China investor. 0:09:26.840 --> 0:09:29.680 So what's the if you guys, you're sitting down with 0:09:29.679 --> 0:09:32.720 your team here these days, what's kind of ther you 0:09:32.720 --> 0:09:35.440 think your best, your smartest idea maybe a little non 0:09:35.520 --> 0:09:36.680 consensus kind of thing. 0:09:37.080 --> 0:09:39.360 Well, I mean, I have to say Europe, I mean, 0:09:39.440 --> 0:09:42.040 you know, I mean, in the face of what's been 0:09:42.080 --> 0:09:45.160 going on, particularly post election, looking at the idea that 0:09:45.200 --> 0:09:47.320 Europe could accelerate next year. You know, in Q three 0:09:47.360 --> 0:09:50.800 that just reported Q three earnings for European companies exceeded 0:09:50.800 --> 0:09:52.520 those for US companies, first time we saw that in 0:09:52.559 --> 0:09:54.319 five quarters. So I think that's a sign of things 0:09:54.360 --> 0:09:56.800 to come. This rotation to financials, which make up much 0:09:56.880 --> 0:09:59.040 larger share of the European equity market than in the US. 0:09:59.240 --> 0:10:01.839 All these things I think, pointing to a surprise outperformance 0:10:01.920 --> 0:10:03.760 by international particularly European equities there. 0:10:03.840 --> 0:10:05.040 Yeah, but Jeff, you know I got to say this. 0:10:05.120 --> 0:10:07.319 You know, the biggest conviction trade in FX land is 0:10:07.360 --> 0:10:09.160 a short euro, right. I mean, so talk to me 0:10:09.200 --> 0:10:10.960 about how you invest in Europe? Do you do it 0:10:11.000 --> 0:10:12.520 on an FX hedge basis? I mean, do you have 0:10:12.520 --> 0:10:13.560 to worry about the currency there? 0:10:13.600 --> 0:10:14.880 I think you have to worry a little bit about 0:10:14.880 --> 0:10:17.079 the currency there. But again, our outlook is more stability 0:10:17.120 --> 0:10:20.040 in the dollar rather than an ongoing rise. But you know, 0:10:20.040 --> 0:10:22.400 if you look back to twenty seventeen, widely expected to 0:10:22.480 --> 0:10:25.160 hear the dollar would rally, it actually fell in twenty seventeen. 0:10:25.280 --> 0:10:28.480 And maybe the Trump administration's policy is for a weaker 0:10:28.559 --> 0:10:30.880 dollar to support you as manufacturing. So we'll have to see. 0:10:31.040 --> 0:10:32.760 What do you think, Damian, where do you think the 0:10:32.800 --> 0:10:34.160 euro goes? What's the call in your. 0:10:34.559 --> 0:10:36.319 I think you got to watch euro yen here, I mean, 0:10:36.360 --> 0:10:38.320 I think, I mean everything I'm reading from all the 0:10:38.480 --> 0:10:40.319 experts who are far smarter than I am, are talking 0:10:40.520 --> 0:10:43.400 weaker euro yen meaning weaker euro, stronger Japanese yen. And 0:10:43.440 --> 0:10:45.200 you know it makes sense fundamentally. Whether or not the 0:10:45.200 --> 0:10:47.840 market's agree is a whole different story. But I mean, Jeff, 0:10:47.840 --> 0:10:49.040 I just have to thank you. I mean, we've been 0:10:49.040 --> 0:10:51.720 pitching you fastballs here. I mean, these are not softball questions, 0:10:52.040 --> 0:10:53.640 and I am loving this. I mean, we could do 0:10:53.640 --> 0:10:54.360 this all day ball. 0:10:55.080 --> 0:10:57.320 But I mean, when I started in All Wall Street 0:10:57.440 --> 0:10:59.199 in the mid eighties, you had to do. 0:10:59.160 --> 0:11:01.800 A tour of duty and Jap and had to. Now 0:11:02.040 --> 0:11:04.880 for a generation, we've forgotten about Japan, but now it's 0:11:04.920 --> 0:11:05.320 coming back. 0:11:05.520 --> 0:11:08.760 It's finally back. Hey, finally last year, you know, across 0:11:08.760 --> 0:11:11.400 in sineteen eighty nine peak again. So yeah, what's old 0:11:11.480 --> 0:11:11.920 is new again? 0:11:12.120 --> 0:11:13.160 Yeah, what's old is new again? 0:11:13.160 --> 0:11:17.160 Absolutely right, Jeff, Jeff Client, top chief Global investment strategist, 0:11:17.280 --> 0:11:18.720 Charles Schwap, thanks so much for joining us. 0:11:24.360 --> 0:11:28.240 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:11:28.320 --> 0:11:31.640 weekday afternoons from seven to ten am. Easter Listen on 0:11:31.679 --> 0:11:34.920 Apple car Play and Android Auto with a Bloomberg Business app, 0:11:35.040 --> 0:11:36.760 or watch us live on YouTube. 0:11:36.880 --> 0:11:37.360 A lot of. 0:11:37.320 --> 0:11:40.200 News flow coming out of Washington, DC, coming out of 0:11:40.440 --> 0:11:43.800 Marrow Lago. Ye kind of the I guess the for 0:11:43.920 --> 0:11:48.200 the president like Trump has been very active here. Let's 0:11:48.200 --> 0:11:50.120 get kind of a lowdown on what's happening down there 0:11:50.120 --> 0:11:53.559 on the political front here domestically. Heidi Krebo Redicker, Adjunct 0:11:53.679 --> 0:11:56.679 Senior Fellow for the Council of Foreign Relations, How do 0:11:56.720 --> 0:11:58.559 you think so much for joining us here? 0:11:59.400 --> 0:12:01.319 You know, I love to just get your thoughts on. 0:12:01.760 --> 0:12:03.480 I think that one of the bigger news items over 0:12:03.520 --> 0:12:05.760 the past twenty four hours coming out of Washington was 0:12:06.200 --> 0:12:09.679 the pardon of by President Biden of his son here A. 0:12:09.840 --> 0:12:12.680 What did you make of that and what might be 0:12:12.760 --> 0:12:15.120 the political fallout I guess going forward. 0:12:17.200 --> 0:12:19.319 So I think you're seeing you're seeing it come out 0:12:19.360 --> 0:12:23.679 in the news that and both Republicans and Democrats have 0:12:23.920 --> 0:12:28.840 been have been quite critical of the move that President 0:12:28.920 --> 0:12:31.240 Biden made. I think they are those who are are 0:12:31.320 --> 0:12:35.520 very sympathetic to him, particularly his own family members. But 0:12:35.720 --> 0:12:39.959 you know, this will we're it's early. We have to 0:12:40.000 --> 0:12:44.080 see what the implications are for how some of the 0:12:44.120 --> 0:12:49.720 personnel and implementation in the Justice in the Justice Department, 0:12:49.920 --> 0:12:52.640 with the FBI and with some of the some of 0:12:52.679 --> 0:12:59.120 the important I guess accusations of politicization of the legal 0:12:59.200 --> 0:13:04.880 system are actually used as an excuse by President incoming 0:13:04.880 --> 0:13:07.040 President Trump to actually take a harder line. 0:13:07.520 --> 0:13:09.040 You know, Heidie, I don't have a Trump a truth 0:13:09.120 --> 0:13:12.000 social account. But you know, last night I heard that 0:13:12.080 --> 0:13:13.960 Trump was warning of all hell to pay of hamas 0:13:13.960 --> 0:13:16.480 doesn't release hostages by January twentieth. I mean, do I 0:13:16.480 --> 0:13:18.320 need a true social account. I mean, talk to me 0:13:18.520 --> 0:13:21.520 about like how the newsflow out of the White House 0:13:21.559 --> 0:13:23.440 is going to emanate for the better part of the 0:13:23.480 --> 0:13:24.480 next four years. 0:13:26.240 --> 0:13:30.360 So I mean with both foreign policy and domestic policy, 0:13:30.520 --> 0:13:33.720 certainly for trade policy. It's a buckle your seat belt 0:13:34.640 --> 0:13:36.600 time right now, because I think we're going to have 0:13:36.720 --> 0:13:41.520 a bumpy ride at the incoming president and his new 0:13:41.600 --> 0:13:44.840 cabinet and personnel are dealing with the world that is 0:13:44.960 --> 0:13:48.480 much different than it was in Trump one point zero. 0:13:48.800 --> 0:13:53.400 And this includes what you were talking about earlier, in 0:13:53.840 --> 0:13:58.280 some instability both political and economic in the core of Europe. 0:13:58.760 --> 0:14:02.240 At the same time, where you have Russia Ukraine, you 0:14:02.280 --> 0:14:07.680 have you have the unraveling of the situation in the 0:14:07.720 --> 0:14:11.240 Middle East, all eyes on whether or not the peace 0:14:12.320 --> 0:14:18.199 between between Lebanon and his Bola and Israel actually managed 0:14:18.240 --> 0:14:21.120 to manages to you know, to stay just below the 0:14:22.840 --> 0:14:26.720 line of exploding and now you have Syria that you're 0:14:26.720 --> 0:14:29.560 throwing into the mix on top of what is the 0:14:29.640 --> 0:14:32.680 larger picture of the US competition with China. So it's 0:14:32.680 --> 0:14:35.640 a big complicated world. And I think we have some 0:14:35.960 --> 0:14:40.160 inexperienced government hands coming coming into the new administration. 0:14:40.560 --> 0:14:42.480 So let's go to that point, Heidi, kind of let's 0:14:42.520 --> 0:14:44.800 step back and take a look at some of the 0:14:44.840 --> 0:14:46.520 cabinet nominees that. 0:14:46.480 --> 0:14:47.960 Put forward by President Elect Trump. 0:14:48.040 --> 0:14:49.840 What are your views on some of the ones that 0:14:49.920 --> 0:14:54.000 presumably might have some challenges getting through Senate confirmation. How 0:14:54.000 --> 0:14:55.440 do you think that how do you think the Senate's 0:14:55.480 --> 0:14:59.480 going to really act here in terms of confirmation. 0:15:00.960 --> 0:15:05.280 So there are definitely some challenging names out there, and 0:15:05.320 --> 0:15:09.120 I think the the the background investigations that we all 0:15:09.200 --> 0:15:13.280 are you used to in the context of going into 0:15:13.280 --> 0:15:16.120 government were not actually done for some of some of 0:15:16.200 --> 0:15:18.440 the ones that the press is going to be coming 0:15:18.440 --> 0:15:22.840 out with stories over over the coming days and weeks 0:15:23.120 --> 0:15:27.440 that will likely be pretty unflattering for a couple a 0:15:27.480 --> 0:15:35.200 couple of the nominees, particularly for Defense and for Attorney 0:15:35.240 --> 0:15:39.040 General and uh and I think, you know, Telsea Gabbard 0:15:39.360 --> 0:15:42.120 in particular, is one that I would I would keep 0:15:42.120 --> 0:15:44.560 an eye on because she's been criticized by her own 0:15:44.600 --> 0:15:49.200 party as being treasonous. That were being used by by 0:15:49.200 --> 0:15:51.400 some Republicans in the past about her to take over 0:15:51.440 --> 0:15:54.480 an important role at d and I dealing with all 0:15:54.520 --> 0:15:57.440 the intelligence agencies. On the economic side, I think you 0:15:57.480 --> 0:16:03.360 have a much better story with with Treasury and with 0:16:03.360 --> 0:16:08.000 with Kevin Hassett coming into the CEA role. The big 0:16:08.080 --> 0:16:11.880 question mark and the topic for lots of Washington gossip 0:16:11.960 --> 0:16:15.680 is sort of what happened to Bob Leithheiser, because the 0:16:16.480 --> 0:16:19.680 rumors are that he's too scared to go big, and 0:16:19.760 --> 0:16:23.200 that's you know, that set off all sorts of conversations 0:16:23.240 --> 0:16:27.360 about is what is too big and why would Bob 0:16:27.440 --> 0:16:28.000 be scared? 0:16:28.360 --> 0:16:31.200 Right, Heidi, you know, I let's talk about Scott Besont, 0:16:31.200 --> 0:16:34.560 you know, Trump's nominee for Treasury secretary. Let's talk about 0:16:34.560 --> 0:16:36.400 the three three three Plan. I mean, the most important 0:16:36.480 --> 0:16:38.560 part of which is reducing the federal budgets to three 0:16:38.600 --> 0:16:39.560 percent of GDP. 0:16:39.800 --> 0:16:43.120 Talk to us about fiscal discipline under a Trump administration. 0:16:44.640 --> 0:16:45.520 It's going to be hard. 0:16:45.920 --> 0:16:48.760 I think that there are a lot of contradictory ambitions 0:16:49.280 --> 0:16:54.000 that President Elect Trump has coming into his second term, 0:16:54.400 --> 0:16:58.640 and you know, the issue with the fiscal discipline and 0:16:58.680 --> 0:17:05.600 anything that requires congressional you know, congressional action, is that 0:17:05.680 --> 0:17:09.840 you have a very thin, very thin majority in the 0:17:09.920 --> 0:17:14.000 House and you have a very very slim majority in 0:17:14.040 --> 0:17:17.439 the Senate as well. So to get everybody on board 0:17:17.480 --> 0:17:21.480 for the type of massive you know, the the renegotiation 0:17:21.720 --> 0:17:27.360 of the of the Trump tax cuts from the last administration, 0:17:28.000 --> 0:17:30.280 and and then some of the spending plans, where is 0:17:30.320 --> 0:17:32.879 he going to get the funds to actually offset some 0:17:32.920 --> 0:17:37.159 of the big the big you know, the big tax 0:17:37.600 --> 0:17:40.159 extension of the tax cuts that he actually wants. 0:17:41.080 --> 0:17:44.240 Heidi, what's your sense as to how the rest of 0:17:44.280 --> 0:17:50.000 the world is planning on dealing with a second Trump administration, 0:17:50.160 --> 0:17:52.879 whether it's our the folks we have some challenges with 0:17:53.080 --> 0:17:54.439 like China as. 0:17:54.280 --> 0:17:57.160 Well as our our allies around the world. What's the 0:17:57.240 --> 0:17:59.159 approach you think they're going to take this time around. 0:18:00.800 --> 0:18:03.399 So you've already seen early days, you've had a lot 0:18:03.480 --> 0:18:08.199 of outreach from leaders around the world, not only congratulating 0:18:09.080 --> 0:18:12.280 and coming President Trump, but also you going to spend 0:18:12.280 --> 0:18:15.120 some time with him, particularly on the back of the 0:18:16.200 --> 0:18:20.879 of the the rally, you know, the the throwing around 0:18:20.880 --> 0:18:24.560 of the of the tariff threat to our closest allies 0:18:24.600 --> 0:18:28.040 and trading partners to the north and south of US, 0:18:28.119 --> 0:18:31.480 and so I think you're going to have You're going 0:18:31.560 --> 0:18:35.280 to have a sit and wait and see with many 0:18:35.320 --> 0:18:37.800 countries about what, you know, what it is they're going 0:18:37.840 --> 0:18:41.880 to be able to to trade in order to have 0:18:42.000 --> 0:18:45.919