1 00:00:00,080 --> 00:00:13,040 Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:33,840 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Joining 5 00:00:33,920 --> 00:00:36,159 Speaker 1: us here in New York now truly two of the 6 00:00:36,280 --> 00:00:38,880 Speaker 1: leading minds in the field of economics, formerly the chief 7 00:00:38,880 --> 00:00:41,519 Speaker 1: economist for the O E. C D and now Cities 8 00:00:41,600 --> 00:00:46,199 Speaker 1: new global Chief Economist Katherine Mann at alongside us, also 9 00:00:46,479 --> 00:00:48,960 Speaker 1: a man that for Wall Street needs no introduction. It's 10 00:00:49,000 --> 00:00:51,879 Speaker 1: Cities Villain bout to so Villain and Catherine, you have 11 00:00:51,920 --> 00:00:53,960 Speaker 1: to help me out. Now, who's in charge? Who makes 12 00:00:53,960 --> 00:00:58,319 Speaker 1: the call for payrolls Fridays? That you, Catherine, it's it's 13 00:00:58,320 --> 00:01:02,320 Speaker 1: above my paper paygrade. The payrolls are absolute. Does Villain 14 00:01:02,440 --> 00:01:04,160 Speaker 1: come in and make a suggestion of what the call 15 00:01:04,200 --> 00:01:06,400 Speaker 1: should be for payrolls Friday? Do you do the job's 16 00:01:06,440 --> 00:01:09,039 Speaker 1: guests over at City still, Villain, I don't get anywhere 17 00:01:09,080 --> 00:01:12,280 Speaker 1: near it. Believed this to the American team. Tom Keane, 18 00:01:12,319 --> 00:01:14,480 Speaker 1: did you know it was such a high profile decision 19 00:01:14,520 --> 00:01:17,680 Speaker 1: to make the call for payrolls Friday over cit Sy 20 00:01:18,120 --> 00:01:22,480 Speaker 1: I did. I think Mr Corbett makes it place. So 21 00:01:22,600 --> 00:01:24,400 Speaker 1: this is a great thing. I'm gonna let John set 22 00:01:24,440 --> 00:01:26,480 Speaker 1: us up here as I set up my Bloomberg terminal. 23 00:01:26,840 --> 00:01:29,120 Speaker 1: But it is John such an honor to have Dr 24 00:01:29,200 --> 00:01:32,039 Speaker 1: Man and Professor Powder with this. Andrew Pitt, when he 25 00:01:32,080 --> 00:01:35,560 Speaker 1: made this announcement said it was about global thinking, and 26 00:01:35,600 --> 00:01:37,880 Speaker 1: that's what you get here. Is other than that, the 27 00:01:37,959 --> 00:01:40,800 Speaker 1: reason they're here today, folks, is these are the only 28 00:01:40,840 --> 00:01:44,520 Speaker 1: two people I know were the worst bracket than I had. 29 00:01:45,480 --> 00:01:47,160 Speaker 1: These are two of the only few people that I 30 00:01:47,280 --> 00:01:49,120 Speaker 1: know that could get you back from spring break. And 31 00:01:49,160 --> 00:01:51,920 Speaker 1: I think that's that's actually why this is why you 32 00:01:51,960 --> 00:01:53,880 Speaker 1: came back to work. I think we throw around this 33 00:01:54,000 --> 00:01:57,000 Speaker 1: term thought leadership way too but I think this morning 34 00:01:57,040 --> 00:02:00,760 Speaker 1: that why don't so, Catherine, there's a big son about 35 00:02:00,760 --> 00:02:03,360 Speaker 1: international trade. There is a hope in the last few 36 00:02:03,440 --> 00:02:05,720 Speaker 1: days that maybe a truce can be found between the 37 00:02:05,800 --> 00:02:08,040 Speaker 1: United States and China. Can you just lay out the 38 00:02:08,040 --> 00:02:10,640 Speaker 1: base case over a city at the moment and some 39 00:02:10,720 --> 00:02:12,480 Speaker 1: of your insight into how you think this is going 40 00:02:12,520 --> 00:02:15,679 Speaker 1: to evolve in the coming months and years. So the 41 00:02:15,720 --> 00:02:19,160 Speaker 1: base cases is that we're not looking at a macroeconomic 42 00:02:19,280 --> 00:02:24,040 Speaker 1: effect coming out of this trade skirmishing UM. And the 43 00:02:24,120 --> 00:02:27,919 Speaker 1: reason why is is that, Uh, the pattern that we've 44 00:02:28,000 --> 00:02:32,280 Speaker 1: observed in these in these announcements is there's there's a 45 00:02:32,360 --> 00:02:35,960 Speaker 1: huge announcement, uh, and then there's a backtrack. I mean, 46 00:02:36,000 --> 00:02:38,919 Speaker 1: let's let's talk about steel and aluminum. Of course, these 47 00:02:39,000 --> 00:02:42,080 Speaker 1: steel is a is a sector that has had protection 48 00:02:42,400 --> 00:02:45,280 Speaker 1: um over the years, a little bit more it's like 49 00:02:45,639 --> 00:02:48,600 Speaker 1: no big deal um. But even in this case, after 50 00:02:48,639 --> 00:02:52,480 Speaker 1: the initial announcement of a big tariff high gone steel 51 00:02:52,480 --> 00:02:57,040 Speaker 1: and aluminum, there was backtracking of well, you know, the 52 00:02:57,120 --> 00:02:59,640 Speaker 1: nafter countries aren't going to be a get one and 53 00:02:59,680 --> 00:03:01,839 Speaker 1: You're isn't going to get the tariff, and so there's 54 00:03:01,919 --> 00:03:07,320 Speaker 1: all these derogations. So big political gain from the announcement, uh, 55 00:03:07,560 --> 00:03:11,600 Speaker 1: roll back the economic costs by giving special deals and 56 00:03:11,680 --> 00:03:14,320 Speaker 1: derogations and so forth. I think that's exactly what we've 57 00:03:14,320 --> 00:03:19,960 Speaker 1: seen with China is big announcement, big political gain. But 58 00:03:20,320 --> 00:03:23,480 Speaker 1: when it comes right down to it, we're the team 59 00:03:23,600 --> 00:03:26,440 Speaker 1: there is searching for the least economic costs that you 60 00:03:26,440 --> 00:03:29,200 Speaker 1: can get out of it. So ultimately, Villain, what's changed, 61 00:03:29,360 --> 00:03:32,640 Speaker 1: what's changed with this administration's approach to these issues compared 62 00:03:32,680 --> 00:03:35,360 Speaker 1: to the administrations that have formally tried to tackle the 63 00:03:35,400 --> 00:03:38,480 Speaker 1: same things over the last few decades, the rest it 64 00:03:38,560 --> 00:03:44,320 Speaker 1: has changed much more aggressive. Second, there is much greater 65 00:03:44,400 --> 00:03:50,120 Speaker 1: vehicles when there are trade issues to unilateralism rather than multilateralism. 66 00:03:50,280 --> 00:03:53,520 Speaker 1: I think the unwilling US to fill the vacancies of 67 00:03:53,560 --> 00:03:56,840 Speaker 1: the judge resolution judges on the w t O is 68 00:03:56,880 --> 00:03:59,360 Speaker 1: an example of that. So I think there is a 69 00:03:59,440 --> 00:04:05,400 Speaker 1: change in tone, but fortunately not enough changing action to 70 00:04:05,560 --> 00:04:10,360 Speaker 1: lead us on the path of systemically significant, macroeconomically unificant 71 00:04:10,360 --> 00:04:12,600 Speaker 1: trade wars. It's hard, Catherine, to see how they could 72 00:04:12,680 --> 00:04:15,000 Speaker 1: establish some kind of multilateral approach to all of this 73 00:04:15,040 --> 00:04:17,320 Speaker 1: when the United States right now doesn't just take issue 74 00:04:17,320 --> 00:04:20,679 Speaker 1: with China, it also takes issue with the European Union. 75 00:04:20,880 --> 00:04:23,480 Speaker 1: The United States is also taking issue with with NAFTA 76 00:04:23,520 --> 00:04:26,320 Speaker 1: partners as well. At this point, it feels very much 77 00:04:26,360 --> 00:04:29,840 Speaker 1: like it's the United States against everybody else. Well, if 78 00:04:29,880 --> 00:04:34,920 Speaker 1: you think that a trade deficit represents a threat, then um, 79 00:04:34,960 --> 00:04:37,360 Speaker 1: we have pretty much have a trade deficit with everybody, 80 00:04:37,440 --> 00:04:39,839 Speaker 1: and so you so there is nobody that you're not 81 00:04:39,880 --> 00:04:42,960 Speaker 1: going to go against. Now it's a failure to understand 82 00:04:43,160 --> 00:04:47,520 Speaker 1: the relationship between savings and investment and trade. It's a 83 00:04:47,560 --> 00:04:50,320 Speaker 1: failure to understand that if you fundamentally or a country 84 00:04:50,360 --> 00:04:53,320 Speaker 1: that spends more than you earn, then you know you're 85 00:04:53,320 --> 00:04:55,280 Speaker 1: going to run a trade deficit. And we're going to 86 00:04:55,360 --> 00:04:58,200 Speaker 1: be doing it in spades going forward when we add 87 00:04:58,200 --> 00:05:01,400 Speaker 1: in this fiscal deficit. Let's stop the show here, folks, 88 00:05:01,480 --> 00:05:04,880 Speaker 1: and talk about the president's certitude. Whether you agree or 89 00:05:04,920 --> 00:05:08,560 Speaker 1: disagree with him, the trade deficits are bad, Professor Bowder. 90 00:05:08,640 --> 00:05:11,479 Speaker 1: Let's begin with you, and long ago, in far away 91 00:05:11,520 --> 00:05:15,279 Speaker 1: there was a dominant United States, with Europe flat on 92 00:05:15,320 --> 00:05:18,040 Speaker 1: its back from World War two and Asia really not 93 00:05:18,160 --> 00:05:22,120 Speaker 1: part of the story, and there were surplus and deficit dynamics. 94 00:05:22,440 --> 00:05:27,320 Speaker 1: Should we fear, Professor Bowder, a trade deficit? No trade 95 00:05:27,320 --> 00:05:32,919 Speaker 1: deficit is simply reflection of domestic production falling short of 96 00:05:32,960 --> 00:05:38,440 Speaker 1: domestic spending right or in the short run, of domestic 97 00:05:38,680 --> 00:05:43,400 Speaker 1: investment exceeding domestic saving. It is simply a macroeconomic imbalance. 98 00:05:43,680 --> 00:05:46,320 Speaker 1: And if you don't like it, what you do is 99 00:05:46,600 --> 00:05:50,920 Speaker 1: things like fiscal tightening, not fiscal listening a bit will 100 00:05:51,000 --> 00:05:54,400 Speaker 1: increase the going to count and trade deficits so it's 101 00:05:54,440 --> 00:05:58,720 Speaker 1: nothing that cannot be handled. There's macroeconomic tools. You don't 102 00:05:58,760 --> 00:06:02,919 Speaker 1: need trade tools. You shouldn't use trade tools to address 103 00:06:02,960 --> 00:06:08,320 Speaker 1: the trade deficits that within that that important comment, doctor Man, 104 00:06:08,320 --> 00:06:10,160 Speaker 1: And this goes back to your classic work as a 105 00:06:10,240 --> 00:06:14,680 Speaker 1: trade deficit sustainable is the idea of what Professor Powder 106 00:06:14,839 --> 00:06:19,000 Speaker 1: just said, which is, if you have fiscal stimulus, by definition, 107 00:06:19,040 --> 00:06:25,280 Speaker 1: you boost consumption which brings imports in. Right, Right, that's 108 00:06:25,440 --> 00:06:28,040 Speaker 1: that's exactly that's the way. That's the way it works. 109 00:06:28,120 --> 00:06:32,520 Speaker 1: I did, okay, exactly right? And what I Professor well, 110 00:06:32,560 --> 00:06:34,760 Speaker 1: I don't give me a farrell get I get the 111 00:06:35,040 --> 00:06:38,320 Speaker 1: I get the quality. C Plus, folks, Professor Powder mentioned 112 00:06:38,360 --> 00:06:42,960 Speaker 1: dollar ambiguity earlier. What is what is Catherine Man's call 113 00:06:43,160 --> 00:06:47,680 Speaker 1: of what a dollar does given fiscal stimulus and given 114 00:06:47,839 --> 00:06:52,440 Speaker 1: new growing imports into the United States. Well, there are 115 00:06:52,440 --> 00:06:56,560 Speaker 1: a lot of different factors that affect dollar dynamics, and 116 00:06:57,200 --> 00:07:01,920 Speaker 1: we can say, well, in theory, a deficit should put 117 00:07:02,000 --> 00:07:05,200 Speaker 1: us in a position where the dollar needs to depreciate 118 00:07:05,320 --> 00:07:10,120 Speaker 1: in order to make US exports more competitive, imports more expensive, 119 00:07:10,480 --> 00:07:17,320 Speaker 1: and that will shift production and consumption towards the domestic production. However, 120 00:07:18,480 --> 00:07:22,239 Speaker 1: there is little evidence that that in fact bears out 121 00:07:22,280 --> 00:07:27,120 Speaker 1: in the US experience, because there are many other factors 122 00:07:27,160 --> 00:07:30,960 Speaker 1: that drive the dollar. Capital flows, the desire to buy 123 00:07:31,120 --> 00:07:35,360 Speaker 1: US assets by US Treasury securities, if you want to 124 00:07:35,400 --> 00:07:39,360 Speaker 1: buy US assets by US real estate by US companies, 125 00:07:39,520 --> 00:07:41,400 Speaker 1: you have to buy the US dollar in order to 126 00:07:41,480 --> 00:07:44,480 Speaker 1: do that, and that tends to cause the dollar to appreciate. 127 00:07:44,720 --> 00:07:46,920 Speaker 1: Can we just wrap up this part of the conversation 128 00:07:46,960 --> 00:07:49,680 Speaker 1: with you guys by just asking a very basic question 129 00:07:49,760 --> 00:07:54,560 Speaker 1: and getting some more insight from you, Catherine, try deficits bad? No? 130 00:07:55,400 --> 00:07:57,240 Speaker 1: Can you walk us through us to why? Because the 131 00:07:57,280 --> 00:07:59,600 Speaker 1: whole premise of this conversation is that a deficit with 132 00:07:59,640 --> 00:08:02,760 Speaker 1: another nation is bad. Can you tell me why not? 133 00:08:03,960 --> 00:08:07,520 Speaker 1: So a trade deficit is not bad because you're in 134 00:08:07,520 --> 00:08:10,880 Speaker 1: a position where other people are willing to sell you 135 00:08:11,040 --> 00:08:14,040 Speaker 1: stuff and you don't actually have to pay for it. 136 00:08:14,600 --> 00:08:18,520 Speaker 1: Usually we think that that's a pretty good deal, right 137 00:08:18,760 --> 00:08:20,680 Speaker 1: we don't we're not paying, we don't have to pay 138 00:08:20,720 --> 00:08:23,280 Speaker 1: for it. We're getting we're getting io used or they're 139 00:08:23,360 --> 00:08:27,320 Speaker 1: they're taking ile use from us, and so we're kind 140 00:08:27,320 --> 00:08:29,800 Speaker 1: of getting something for nothing, and usually that's a pretty 141 00:08:29,800 --> 00:08:33,120 Speaker 1: good deal. Does it last forever? No, it's a good point. 142 00:08:33,400 --> 00:08:36,839 Speaker 1: But while it's you know, it's been going on for 143 00:08:36,840 --> 00:08:40,360 Speaker 1: a while, more than a generation. Villain, do you take 144 00:08:40,400 --> 00:08:42,880 Speaker 1: that that sign of things as well? Absolutely. I think 145 00:08:42,920 --> 00:08:47,920 Speaker 1: the notion that trade deficits are bad is cantilest nonsense, right, 146 00:08:48,520 --> 00:08:52,040 Speaker 1: but it is They're not indefinitely sustainable. If you are 147 00:08:53,360 --> 00:08:57,240 Speaker 1: international debtor to the US is on average in the future, 148 00:08:57,360 --> 00:08:59,400 Speaker 1: you're going to have to run trade surpluses. Well, then, 149 00:08:59,480 --> 00:09:02,360 Speaker 1: very quickly, doctor man, is it American chill America? Is 150 00:09:02,360 --> 00:09:06,880 Speaker 1: that where we're heading? Is President Trump represent American chill America? Well, 151 00:09:06,920 --> 00:09:11,240 Speaker 1: his emphasis on exports being good and imports being bad 152 00:09:11,720 --> 00:09:16,679 Speaker 1: is mercantilist. Now let's think about exports. You produce them, 153 00:09:16,720 --> 00:09:19,720 Speaker 1: but you can't consume them because you send them to 154 00:09:19,760 --> 00:09:22,400 Speaker 1: somebody else. How is that a good thing? Let's come 155 00:09:22,400 --> 00:09:24,559 Speaker 1: back and talk about this. Is that is a good thing. 156 00:09:25,520 --> 00:09:27,320 Speaker 1: It's a good thing. They stand with us for the 157 00:09:27,320 --> 00:09:30,200 Speaker 1: next three hours. You get an a start this morning, 158 00:09:30,360 --> 00:09:34,560 Speaker 1: Tom King Villain bouta City especially economic advisor alongside Katherine Mann, 159 00:09:34,840 --> 00:09:53,440 Speaker 1: City Global Chief Economists. You're listening to Bloomberg Surveillance. Let's 160 00:09:53,440 --> 00:09:55,640 Speaker 1: bring it a guest, shall we? Eric Shenstein, the Jensen 161 00:09:55,720 --> 00:09:59,400 Speaker 1: Investment Management portfolio manager and very place to say, joined 162 00:09:59,480 --> 00:10:01,400 Speaker 1: us in New Year k He's been shaking his head 163 00:10:01,440 --> 00:10:03,440 Speaker 1: at Tom and I for the last five minutes. Erek 164 00:10:03,520 --> 00:10:05,080 Speaker 1: is greing to have you with sen A studio. Thank 165 00:10:05,080 --> 00:10:08,200 Speaker 1: you very much. What has changed in the last couple 166 00:10:08,280 --> 00:10:10,800 Speaker 1: of weeks? Why are we seen such wild swings in 167 00:10:10,840 --> 00:10:13,480 Speaker 1: equity markets? Well, I think for the first time in 168 00:10:13,720 --> 00:10:17,160 Speaker 1: quite some time, you you actually have things that are 169 00:10:17,440 --> 00:10:21,200 Speaker 1: different from the standpoint of you know, concerns around rising 170 00:10:21,280 --> 00:10:25,600 Speaker 1: rate environments. Certainly the tariff actions that have taken place, 171 00:10:25,720 --> 00:10:28,280 Speaker 1: even going back to last year's trade legislator or a 172 00:10:28,320 --> 00:10:31,240 Speaker 1: tax legislation that was signed late in the year. There's 173 00:10:31,280 --> 00:10:33,640 Speaker 1: just a number of moving parts that we haven't had 174 00:10:33,800 --> 00:10:35,640 Speaker 1: for quite some time. I mean, if you think about 175 00:10:35,640 --> 00:10:37,960 Speaker 1: the last couple of years, we've been pretty complacent as 176 00:10:38,000 --> 00:10:42,200 Speaker 1: a market. Uh. They has led to generally pretty benign 177 00:10:42,640 --> 00:10:45,440 Speaker 1: concerns on the parts of market investors. And now for 178 00:10:45,480 --> 00:10:47,720 Speaker 1: the first time, you actually have some decisions to make 179 00:10:48,480 --> 00:10:53,240 Speaker 1: and really some uh, some concerns that people are thinking 180 00:10:53,280 --> 00:10:55,240 Speaker 1: about in terms of some of those challenges and what 181 00:10:55,280 --> 00:10:57,720 Speaker 1: that could mean. Why are we struggling a month later 182 00:10:57,840 --> 00:11:00,600 Speaker 1: to still clear the volatility shock of a month ago. 183 00:11:00,840 --> 00:11:02,760 Speaker 1: It's pretty clear to me that we still haven't shaken 184 00:11:02,760 --> 00:11:04,440 Speaker 1: out of that. The VIX is still north of twenty. 185 00:11:04,640 --> 00:11:06,520 Speaker 1: And if you look at the volatility of volatility so 186 00:11:06,640 --> 00:11:09,360 Speaker 1: to speak, the v VIX that's still elevated as well. 187 00:11:09,400 --> 00:11:12,160 Speaker 1: And I think we're really struggling to find Yes, we're 188 00:11:12,160 --> 00:11:15,440 Speaker 1: in a high volatility regime, but but where is it 189 00:11:15,559 --> 00:11:19,360 Speaker 1: north of twenty? Is it north of fifteen? Where is it? Well? 190 00:11:19,400 --> 00:11:21,559 Speaker 1: I think for us, you know, when when we think 191 00:11:21,600 --> 00:11:23,599 Speaker 1: about looking at businesses that we want to invest in, 192 00:11:23,640 --> 00:11:25,720 Speaker 1: we only invest in twenty seven stocks in our in 193 00:11:25,720 --> 00:11:28,520 Speaker 1: our strategy, and we really are very focused fundamentally. But 194 00:11:28,559 --> 00:11:32,160 Speaker 1: I think one of the things about volatility is volatility 195 00:11:32,160 --> 00:11:34,559 Speaker 1: in some respects is created by a lack of transparency. 196 00:11:34,679 --> 00:11:36,400 Speaker 1: And when we listen to what's been coming out of 197 00:11:36,400 --> 00:11:38,960 Speaker 1: our companies, for instance, the most recent earning season that's 198 00:11:39,000 --> 00:11:41,560 Speaker 1: just now winding down or has pretty much wound down, 199 00:11:42,080 --> 00:11:44,760 Speaker 1: you were not hearing a lot of certainty on the 200 00:11:44,760 --> 00:11:47,640 Speaker 1: parts of the businesses, even from the standpoint of the say, 201 00:11:47,679 --> 00:11:50,840 Speaker 1: what would be favorable tax opportunities because of more control 202 00:11:50,880 --> 00:11:54,400 Speaker 1: over their free cash flow. You weren't hearing rising wage 203 00:11:54,400 --> 00:11:58,000 Speaker 1: increases for their employees. You weren't hearing major CAPEX spending 204 00:11:58,120 --> 00:12:00,720 Speaker 1: or R and D spending. You were still hearing pretty 205 00:12:00,760 --> 00:12:03,920 Speaker 1: much a lot of uncertainty in those companies. And I 206 00:12:03,960 --> 00:12:06,080 Speaker 1: think that translates into a lot of what we've seen 207 00:12:06,120 --> 00:12:08,640 Speaker 1: in the markets the last couple of weeks. Are you 208 00:12:08,840 --> 00:12:14,520 Speaker 1: advantaged enjoying the urban climbs of Portland, Oregon? Do you 209 00:12:14,520 --> 00:12:16,520 Speaker 1: get to hide there and not pick up the Wall 210 00:12:16,520 --> 00:12:20,040 Speaker 1: Street zeitgeist? It's got to be a huge benefit. I 211 00:12:20,080 --> 00:12:22,400 Speaker 1: actually like to think that it is a benefit. It's 212 00:12:22,520 --> 00:12:25,240 Speaker 1: it's we've always talked about it as being away from 213 00:12:25,280 --> 00:12:27,760 Speaker 1: the noise, if you will, where how is he looking 214 00:12:27,800 --> 00:12:33,520 Speaker 1: at me? When out in quiet Portland, Oregon? Just keeping 215 00:12:33,520 --> 00:12:35,560 Speaker 1: our heads down and looking at fundamentals? And so what 216 00:12:35,600 --> 00:12:37,640 Speaker 1: did you do with g Because, first of all, folks, 217 00:12:37,640 --> 00:12:41,199 Speaker 1: a Jensen note on their disclosure of what they are 218 00:12:41,280 --> 00:12:45,360 Speaker 1: doing is first rate, is world class research note explaining 219 00:12:45,360 --> 00:12:48,280 Speaker 1: what their portfolios do. And part of it is your 220 00:12:48,360 --> 00:12:52,480 Speaker 1: cell exercise. Walk us through what you did in Portland, 221 00:12:52,559 --> 00:12:58,000 Speaker 1: Oregon with Generous Electric. We sold it when it broke 222 00:12:58,040 --> 00:13:02,079 Speaker 1: our return on equity standards. So that number one thing exactly, 223 00:13:02,200 --> 00:13:06,640 Speaker 1: and that that's important because it indicates that the business 224 00:13:06,640 --> 00:13:10,960 Speaker 1: return that they're generating consistently above cost of capital is 225 00:13:11,120 --> 00:13:14,320 Speaker 1: consistent enough that they are able to withstand shocks. And 226 00:13:14,360 --> 00:13:16,080 Speaker 1: in g e s case, they were not able to 227 00:13:16,120 --> 00:13:19,000 Speaker 1: withstand the shock of what happened with the subprime crisis 228 00:13:19,000 --> 00:13:21,920 Speaker 1: in GE and then with the in that is exercise 229 00:13:21,960 --> 00:13:24,839 Speaker 1: of moving from email to Flannery. I don't care if 230 00:13:24,840 --> 00:13:28,080 Speaker 1: you buy hold cell G right now, but can as 231 00:13:28,160 --> 00:13:34,880 Speaker 1: CEO and a management turnaround that shareholder equity challenge? Well, 232 00:13:34,920 --> 00:13:37,160 Speaker 1: in our case, they haven't turned it around yet. G 233 00:13:37,320 --> 00:13:41,280 Speaker 1: E actually isn't even eligible within our investible universe because 234 00:13:41,679 --> 00:13:44,280 Speaker 1: since the subprime crisis and since everything that went on, 235 00:13:44,360 --> 00:13:48,360 Speaker 1: which capital, they haven't actually returned to a consistent high 236 00:13:48,440 --> 00:13:51,319 Speaker 1: business return above cost of capital. So for in our case, 237 00:13:51,720 --> 00:13:54,240 Speaker 1: it's a pretty simple we can't even look at it. Then, 238 00:13:54,280 --> 00:13:57,760 Speaker 1: how does a guy like you with that conservative mentality 239 00:13:57,920 --> 00:14:01,600 Speaker 1: own something with a price to sales of Apple? Well, 240 00:14:01,640 --> 00:14:05,160 Speaker 1: because in Apple's case, for us, it's about the it's 241 00:14:05,200 --> 00:14:07,280 Speaker 1: really about the all the free cash that they have 242 00:14:07,600 --> 00:14:09,920 Speaker 1: in and frankly, when you look at it on a 243 00:14:10,040 --> 00:14:14,680 Speaker 1: valuation basis relative to what's out there. We don't think 244 00:14:14,720 --> 00:14:18,000 Speaker 1: that it's actually that high in terms of the in 245 00:14:18,120 --> 00:14:20,120 Speaker 1: terms of the underlying price when you look at other metrics, 246 00:14:20,160 --> 00:14:23,840 Speaker 1: price to cash flow. Uh, just the general revenue growth 247 00:14:23,840 --> 00:14:25,920 Speaker 1: that they've got, the services growth that we think is 248 00:14:25,960 --> 00:14:28,400 Speaker 1: really going to be part of what makes that company 249 00:14:28,480 --> 00:14:31,360 Speaker 1: special going forward. What is quality growth? Can you sort 250 00:14:31,360 --> 00:14:33,320 Speaker 1: of define that for us? What you consider to be 251 00:14:33,440 --> 00:14:39,480 Speaker 1: quality growth? Quality growth is competitive advantages that are durable 252 00:14:39,560 --> 00:14:43,160 Speaker 1: or sustainable, strong management teams that understand with all of 253 00:14:43,200 --> 00:14:45,320 Speaker 1: the free cash flow they have at their disposal, they're 254 00:14:45,320 --> 00:14:47,440 Speaker 1: going to continue to reinvest it in a number of 255 00:14:47,440 --> 00:14:50,920 Speaker 1: different opportunities to generate those business returns into the future. 256 00:14:51,360 --> 00:14:55,840 Speaker 1: And they have a level of consistency that allows them 257 00:14:55,880 --> 00:15:00,880 Speaker 1: to from a quality aspect, offset or mitiga the business 258 00:15:00,960 --> 00:15:03,440 Speaker 1: risk of investing in that business. That's why we want 259 00:15:03,480 --> 00:15:06,440 Speaker 1: to see it as quality and that secular growth factors 260 00:15:06,480 --> 00:15:08,880 Speaker 1: within that that sort of insulate you from from what 261 00:15:08,920 --> 00:15:11,800 Speaker 1: you would call the noise of the last two weeks. Yeah, 262 00:15:11,800 --> 00:15:13,760 Speaker 1: there are things that I mean, part of what insulates 263 00:15:13,840 --> 00:15:16,360 Speaker 1: us as or insulates these businesses as a high level 264 00:15:16,360 --> 00:15:19,720 Speaker 1: of free cash flow that they generate is so high 265 00:15:19,800 --> 00:15:23,800 Speaker 1: that organic growth or acquisition growth or shared by backs 266 00:15:23,840 --> 00:15:26,760 Speaker 1: or dividends. They don't have to make choices. We still 267 00:15:26,760 --> 00:15:28,480 Speaker 1: want them to make the right choices, but they have 268 00:15:28,560 --> 00:15:31,160 Speaker 1: the luxury of being able to deploy free cash towards 269 00:15:31,160 --> 00:15:34,560 Speaker 1: all those opportunities. How how important is time horizon in 270 00:15:34,600 --> 00:15:37,560 Speaker 1: these investable opportunities for you guys, Because I was having 271 00:15:37,600 --> 00:15:39,960 Speaker 1: this conversation yesterday that that basically just said, if you 272 00:15:40,040 --> 00:15:43,200 Speaker 1: had your money in this market for x amount of time, 273 00:15:43,440 --> 00:15:45,760 Speaker 1: you should ignore everything has happened in the last two 274 00:15:45,760 --> 00:15:47,880 Speaker 1: weeks and ignore all the news from here on out 275 00:15:47,920 --> 00:15:50,400 Speaker 1: through the rest of the year, because ultimately the conversation 276 00:15:50,400 --> 00:15:52,880 Speaker 1: about a prospect for a trade will great for volatility, 277 00:15:52,960 --> 00:15:54,920 Speaker 1: but in terms of the fundamentals of some of these 278 00:15:54,920 --> 00:15:57,640 Speaker 1: companies and things really going to change, Yeah, that's that's 279 00:15:57,680 --> 00:15:59,880 Speaker 1: a very important part time horizon for us. It really 280 00:16:00,040 --> 00:16:03,040 Speaker 1: we think about investing for full market cycles, where you 281 00:16:03,160 --> 00:16:06,560 Speaker 1: see what the business can do regardless of what's happening 282 00:16:06,600 --> 00:16:09,120 Speaker 1: from an economic perspective. That's actually one of the challenges 283 00:16:09,240 --> 00:16:11,480 Speaker 1: right now is that that full market cycle has been 284 00:16:12,000 --> 00:16:14,360 Speaker 1: It's you know, the downturn was a long time ago 285 00:16:14,440 --> 00:16:16,800 Speaker 1: for people to remember what that was like and that's 286 00:16:16,800 --> 00:16:18,120 Speaker 1: time we got left to you you and we want you 287 00:16:18,160 --> 00:16:20,040 Speaker 1: to come back because I think there's a lot of 288 00:16:20,480 --> 00:16:25,400 Speaker 1: talk here about the discipline of investing. I want to 289 00:16:25,400 --> 00:16:27,960 Speaker 1: talk about the future of Portland. Is Portland just get 290 00:16:28,000 --> 00:16:31,640 Speaker 1: bigger and bigger and bigger or could they maintain the 291 00:16:31,720 --> 00:16:35,880 Speaker 1: miracle by managing growth? Boulder Colorado couldn't do it a 292 00:16:35,960 --> 00:16:38,320 Speaker 1: bunch of years ago. Well, it's interesting you mentioned that 293 00:16:38,400 --> 00:16:41,400 Speaker 1: we just had an article locally that we had actually 294 00:16:41,400 --> 00:16:45,320 Speaker 1: some of our slowest population games since two thousand thirteen. 295 00:16:45,360 --> 00:16:49,040 Speaker 1: We're still growing, but growing a little bit slower. Um. 296 00:16:49,200 --> 00:16:51,920 Speaker 1: I think Portland is Uh, it's a wonderful place to live, 297 00:16:51,960 --> 00:16:54,520 Speaker 1: It's a wonderful place to raise a family and in 298 00:16:54,600 --> 00:16:57,600 Speaker 1: a reasonably good business environment. Um So I think it's 299 00:16:57,720 --> 00:17:00,680 Speaker 1: it's poised to continue to be a pretty can you 300 00:17:00,840 --> 00:17:03,200 Speaker 1: can you take time with you so just to Potland 301 00:17:03,240 --> 00:17:12,440 Speaker 1: for a little bit. We don't have a hockey team. 302 00:17:12,480 --> 00:17:16,440 Speaker 1: He's not this guy, Eric Schoenstein, the Genten Investment Management. 303 00:17:17,119 --> 00:17:29,040 Speaker 1: I managed great to have you with us. It is 304 00:17:29,040 --> 00:17:31,760 Speaker 1: a great joy to explain to you why you should 305 00:17:31,800 --> 00:17:35,840 Speaker 1: be on Twitter if you have any interest in economics, finance, investment, 306 00:17:35,920 --> 00:17:39,439 Speaker 1: international relations, or politics. You need to go on Twitter 307 00:17:39,480 --> 00:17:44,399 Speaker 1: for only one reason. At the Stalwart is the most interesting, 308 00:17:44,560 --> 00:17:48,640 Speaker 1: eclectic feed of stuff in the studio with us now 309 00:17:49,400 --> 00:17:53,119 Speaker 1: is Joe Wisenthal, who outed at the Stalwart, has reinvented 310 00:17:53,119 --> 00:17:56,320 Speaker 1: a lot of business journalism, business economics. He's the coast 311 00:17:56,320 --> 00:17:58,560 Speaker 1: of what you missed? What time is that? On Bloomberg. 312 00:17:58,600 --> 00:18:01,720 Speaker 1: I'm using having the surveyor snap when you're on you 313 00:18:02,920 --> 00:18:06,639 Speaker 1: from three thirty eastern to five pm every day, Monday 314 00:18:06,640 --> 00:18:09,640 Speaker 1: through Fiday days a week. Why are we having such volatility? 315 00:18:09,760 --> 00:18:12,320 Speaker 1: Or the down twelve points up seven in points? What's 316 00:18:12,320 --> 00:18:16,720 Speaker 1: the why? You know? My favorite theory is essentially that 317 00:18:16,800 --> 00:18:20,080 Speaker 1: it has to do with the rising rate, the normalization 318 00:18:20,600 --> 00:18:23,680 Speaker 1: this idea that and not actually so much the rising 319 00:18:23,800 --> 00:18:26,119 Speaker 1: rates per se, but more the wine down of the 320 00:18:26,119 --> 00:18:29,720 Speaker 1: Fed's balance sheet. That essentially, when the FED took so 321 00:18:29,760 --> 00:18:33,280 Speaker 1: many assets out of the market essentially sucked volatility out 322 00:18:33,280 --> 00:18:36,280 Speaker 1: of the market, and that the return of those as is, 323 00:18:36,320 --> 00:18:41,159 Speaker 1: particularly mortgage backed securities into the market has reintroduced a 324 00:18:41,240 --> 00:18:43,960 Speaker 1: level of volatility. There's probably lots of explanations, but I 325 00:18:44,040 --> 00:18:46,840 Speaker 1: find that one to be sort of intuitive and it 326 00:18:46,920 --> 00:18:48,960 Speaker 1: feels right. You and I could talk for four hours 327 00:18:48,960 --> 00:18:51,480 Speaker 1: about you know, twenty seven things. But going through your 328 00:18:51,480 --> 00:18:55,240 Speaker 1: Twitter feed, Yeah, because you always do killer charts, which 329 00:18:55,280 --> 00:18:57,679 Speaker 1: then folks I steal and call my own. One of 330 00:18:57,720 --> 00:19:03,080 Speaker 1: them is finally yields compete with dividends. That's a great wisdom. 331 00:19:03,400 --> 00:19:06,600 Speaker 1: This is really, I would say, becoming the dominant story 332 00:19:06,840 --> 00:19:10,240 Speaker 1: in investing in portfolio decisions right now, which is that 333 00:19:10,359 --> 00:19:13,359 Speaker 1: for the first time since the crisis, you can actually 334 00:19:13,400 --> 00:19:16,520 Speaker 1: earn a little bit by taking on zero risk. You can. 335 00:19:16,800 --> 00:19:19,320 Speaker 1: You don't earn much. It's not like you can make 336 00:19:19,359 --> 00:19:21,600 Speaker 1: a ton of money buying to your yields or three 337 00:19:21,680 --> 00:19:24,959 Speaker 1: month bills or whatever it is, but it's something, and 338 00:19:25,000 --> 00:19:28,200 Speaker 1: that's different from nothing. And so before you were losing 339 00:19:28,200 --> 00:19:30,520 Speaker 1: money essentially because you were getting eaten up by inflation. 340 00:19:30,880 --> 00:19:33,560 Speaker 1: That's not the case anymore. And so all other investments, 341 00:19:34,240 --> 00:19:38,159 Speaker 1: high dividend stocks, high yield bonds, regular equities, now at 342 00:19:38,200 --> 00:19:41,440 Speaker 1: least at the margins have to compete with the risk 343 00:19:41,480 --> 00:19:45,080 Speaker 1: free rate. Karen Moscow, the bitcoin quote you synthesize a 344 00:19:45,160 --> 00:19:47,720 Speaker 1: lot of the what, frankly, folks I think is a 345 00:19:47,760 --> 00:19:54,040 Speaker 1: fair complete discussion at Bloomberg about crypto, about bitcoin, all 346 00:19:54,080 --> 00:19:56,920 Speaker 1: I know is a chart looks terrible. It was there 347 00:19:56,920 --> 00:19:59,920 Speaker 1: a target for that chart? I don't know. I mean 348 00:20:00,040 --> 00:20:01,960 Speaker 1: it's a it's a you. You and I are not 349 00:20:02,040 --> 00:20:03,920 Speaker 1: in the game of predicting this stuff, but we can 350 00:20:03,960 --> 00:20:07,439 Speaker 1: both stay it looks. It looks like death to put it, 351 00:20:07,920 --> 00:20:10,119 Speaker 1: and it smells it price smells like death if you 352 00:20:10,119 --> 00:20:12,240 Speaker 1: could smell it as well. No, I mean it's the 353 00:20:12,400 --> 00:20:15,800 Speaker 1: government's intruding. No, I don't think that's it. I think, Look, 354 00:20:16,240 --> 00:20:19,359 Speaker 1: it is remarkable. The day the bitcoin peaked, I think 355 00:20:19,520 --> 00:20:23,439 Speaker 1: was in early December, was literally the day that the 356 00:20:23,480 --> 00:20:28,280 Speaker 1: CMME futures debut. There's something just completely beautiful about this thing, 357 00:20:28,640 --> 00:20:31,040 Speaker 1: which emerged in sort of the deep recesses of the 358 00:20:31,040 --> 00:20:36,240 Speaker 1: Internet counter culture, finally making its peak the moment it 359 00:20:36,359 --> 00:20:39,600 Speaker 1: got it's true embrace from the institutional side. I don't 360 00:20:39,600 --> 00:20:41,840 Speaker 1: know if that will be adultimate peak, but there is 361 00:20:41,880 --> 00:20:46,720 Speaker 1: something almost poetic about it. You invented a huge part 362 00:20:46,800 --> 00:20:51,280 Speaker 1: of modern business journalism. You said headlines are boring. When 363 00:20:51,280 --> 00:20:53,840 Speaker 1: you're over in business inside with Mr Blodge, you said, 364 00:20:53,840 --> 00:20:56,920 Speaker 1: we're gonna make headlines come out of the screen and 365 00:20:56,960 --> 00:21:01,160 Speaker 1: we're gonna have a sharp, sharp, cogent article behind. It 366 00:21:01,200 --> 00:21:05,720 Speaker 1: was selected bullet points and that everybody's gone that way. 367 00:21:05,760 --> 00:21:09,000 Speaker 1: Are we now too sharp and cogent? Have we gone 368 00:21:09,480 --> 00:21:13,040 Speaker 1: too far towards Wisenthal journalism? You know, what I would 369 00:21:13,040 --> 00:21:16,240 Speaker 1: say is that it's not that there is I mean, 370 00:21:16,240 --> 00:21:18,680 Speaker 1: I would say, at times, the media can go too 371 00:21:18,680 --> 00:21:21,720 Speaker 1: far in one direction. I've always likened the media in 372 00:21:21,760 --> 00:21:24,639 Speaker 1: the digital environment to the hedge fund business in the 373 00:21:24,720 --> 00:21:29,320 Speaker 1: sense that strategies only work so long before they become commoditized, 374 00:21:29,320 --> 00:21:31,320 Speaker 1: and everyone can do that. That's a great theory of 375 00:21:31,400 --> 00:21:35,480 Speaker 1: John Templeton's. Then the alpha disappears. So at one point 376 00:21:35,520 --> 00:21:39,360 Speaker 1: maybe you gained edge with really aggressive headlines. Then everyone 377 00:21:39,520 --> 00:21:42,640 Speaker 1: does really aggressive, sharp headlines, and suddenly all those headlines 378 00:21:42,680 --> 00:21:44,720 Speaker 1: have become like noise and you can't pay attention to them. 379 00:21:44,840 --> 00:21:47,040 Speaker 1: You have to find something new. But I guess that 380 00:21:47,160 --> 00:21:49,720 Speaker 1: also implies we're never going to get to some stable 381 00:21:49,800 --> 00:21:52,280 Speaker 1: equilibrium where we're like, Okay, this is what media should 382 00:21:52,320 --> 00:21:54,199 Speaker 1: look like, and there will always be the sort of 383 00:21:54,280 --> 00:21:57,240 Speaker 1: cat and mouse game of figuring out a new strategy 384 00:21:57,320 --> 00:21:59,600 Speaker 1: to get attention in this world where lots everyone is 385 00:21:59,600 --> 00:22:02,280 Speaker 1: trying to have your attention. Then everyone figures it out, 386 00:22:02,320 --> 00:22:04,000 Speaker 1: and then you have to find something new back to 387 00:22:04,040 --> 00:22:07,000 Speaker 1: the markets spoil. John Farrell just had a great interview 388 00:22:07,040 --> 00:22:09,840 Speaker 1: with a Ramco on this deal they're trying to bring. 389 00:22:10,160 --> 00:22:13,000 Speaker 1: Ford oil has got a lift to it, But like 390 00:22:13,040 --> 00:22:15,720 Speaker 1: a lot of other things we look at, technically, it's 391 00:22:15,840 --> 00:22:18,080 Speaker 1: range bound. A lot of things this morning are at 392 00:22:18,119 --> 00:22:22,000 Speaker 1: the edge of the range, but still it's home on 393 00:22:22,040 --> 00:22:24,119 Speaker 1: the range. We're all within the range. What are the 394 00:22:24,160 --> 00:22:27,280 Speaker 1: catalysts you're looking at where we could break out on 395 00:22:27,320 --> 00:22:30,080 Speaker 1: whatever the issue is. To a higher level, Well, I 396 00:22:30,119 --> 00:22:33,359 Speaker 1: do think it is interesting that oil is basically at 397 00:22:33,480 --> 00:22:36,040 Speaker 1: multi year highs right now. At the end of the 398 00:22:36,119 --> 00:22:38,600 Speaker 1: last week, when we got that really intense selling and 399 00:22:38,600 --> 00:22:41,800 Speaker 1: equities and risk assets, oil held up fine, which was 400 00:22:41,840 --> 00:22:46,560 Speaker 1: pretty impressive and I think probably a bit surprising. I mean, obviously, 401 00:22:47,280 --> 00:22:50,480 Speaker 1: the story that everyone is still focusing on is US 402 00:22:50,520 --> 00:22:55,720 Speaker 1: supply and US inventories, and I don't see another obvious 403 00:22:55,800 --> 00:22:58,639 Speaker 1: story out there in terms of what is going to 404 00:22:58,720 --> 00:23:01,159 Speaker 1: be the marginal determ e minant of the price of 405 00:23:01,240 --> 00:23:03,760 Speaker 1: barrel of oil. It still seems like it's the U 406 00:23:03,760 --> 00:23:05,919 Speaker 1: S story. But you know, as long as the world 407 00:23:06,040 --> 00:23:10,320 Speaker 1: is growing well and nobody is rolling over, it seems 408 00:23:10,320 --> 00:23:12,800 Speaker 1: like there's a bit under oil. It's pretty impressive from 409 00:23:12,840 --> 00:23:16,439 Speaker 1: all of your reading and literature. We we become dumb 410 00:23:16,520 --> 00:23:19,240 Speaker 1: to double digit ears and equities. It just seems like 411 00:23:19,280 --> 00:23:21,439 Speaker 1: it's been a trend. And you and I know the 412 00:23:21,480 --> 00:23:24,720 Speaker 1: math of reversion of the mean and swinging down under 413 00:23:24,880 --> 00:23:28,320 Speaker 1: you know, low single digit returns. Well, you know what, 414 00:23:28,440 --> 00:23:30,840 Speaker 1: we've made it through another three months of two thousand 415 00:23:30,880 --> 00:23:34,080 Speaker 1: and eighteen. And yeah, it's been a little votel so recently, 416 00:23:34,160 --> 00:23:37,000 Speaker 1: but I believe we're up eleven or seventeen percent whatever 417 00:23:37,040 --> 00:23:39,840 Speaker 1: the number is, twelve months trailing. It's a double digit 418 00:23:39,880 --> 00:23:43,240 Speaker 1: twelve months trailing. We did get, uh, sort of spoiled, 419 00:23:43,520 --> 00:23:48,000 Speaker 1: didn't we in seventeen and especially January eighteen, which was 420 00:23:48,000 --> 00:23:51,000 Speaker 1: probably beyond spoiled in the sense then it was just 421 00:23:51,440 --> 00:23:54,720 Speaker 1: so intensely up every day. And so yeah, we've obviously 422 00:23:54,760 --> 00:23:57,320 Speaker 1: had to pick up a volatility, but even look at 423 00:23:57,359 --> 00:24:01,200 Speaker 1: these stocks that have really gotten hammered, and obviously Facebook 424 00:24:01,200 --> 00:24:04,160 Speaker 1: in the last two weeks has had a terrible month 425 00:24:04,280 --> 00:24:07,560 Speaker 1: or terrible a few weeks. It's only back to levels 426 00:24:07,920 --> 00:24:10,680 Speaker 1: that saw last summer. And that's not that bad. I mean, 427 00:24:10,680 --> 00:24:13,720 Speaker 1: that is very normal for any stock if you say, Okay, 428 00:24:13,800 --> 00:24:19,240 Speaker 1: it's March. Now, the stock is at June or July levels. 429 00:24:19,440 --> 00:24:21,960 Speaker 1: That's not a very big deal typically for any stock. 430 00:24:22,160 --> 00:24:25,120 Speaker 1: And yet this is what is coming off a brutal week, 431 00:24:25,200 --> 00:24:27,120 Speaker 1: and so kind of puts it into respect. Twelve months 432 00:24:27,119 --> 00:24:35,680 Speaker 1: total return on Facebook up, I'll take multiple with no dividend. Yeah, 433 00:24:35,960 --> 00:24:38,400 Speaker 1: And I think, yeah, exactly right. And I think that 434 00:24:38,720 --> 00:24:40,840 Speaker 1: you know, the business models of these tech giants are 435 00:24:40,880 --> 00:24:44,000 Speaker 1: such that as they get bigger, they get stronger, and 436 00:24:44,080 --> 00:24:46,200 Speaker 1: so there's sort of feed the network effects they feed 437 00:24:46,200 --> 00:24:50,119 Speaker 1: on themselves. But the risk is situations like this, lots 438 00:24:50,160 --> 00:24:55,320 Speaker 1: of headline risk, regulatory risk, societal backlash risk, and so 439 00:24:55,480 --> 00:24:58,320 Speaker 1: that's what you sort of that's the price you pay 440 00:24:58,359 --> 00:25:01,040 Speaker 1: for that outperform. I look on the room John Tucker 441 00:25:01,080 --> 00:25:03,360 Speaker 1: and I John, we have no social life doing. I mean, 442 00:25:03,600 --> 00:25:07,280 Speaker 1: let's be speak for yourself. Okay, how's biscuits, how's the 443 00:25:07,520 --> 00:25:11,480 Speaker 1: how's the beast? Biscuit is good? Yeah, that he's doing 444 00:25:11,520 --> 00:25:14,960 Speaker 1: fine too. Has a real social life is something? I mean? 445 00:25:15,000 --> 00:25:19,520 Speaker 1: You are Okay, you go to south By Southwest everything. 446 00:25:19,520 --> 00:25:21,960 Speaker 1: I haven't been there since two thousand and seven. Okay, 447 00:25:21,960 --> 00:25:24,359 Speaker 1: well that's like last year for us yeah, Okay, south 448 00:25:24,400 --> 00:25:26,520 Speaker 1: By Southwest has gone I mean, you're the Texas guy, 449 00:25:26,560 --> 00:25:28,840 Speaker 1: and it's like, oh, news, isn't it. Well, it's funny 450 00:25:28,840 --> 00:25:30,479 Speaker 1: because so I said, the last time I was there 451 00:25:30,520 --> 00:25:33,000 Speaker 1: is two thousands, when it was real. No, even if 452 00:25:33,119 --> 00:25:36,080 Speaker 1: that's the funny thing. At that point, I remember saying, oh, 453 00:25:36,119 --> 00:25:38,760 Speaker 1: this has just gotten completely ridiculous, because I had also 454 00:25:38,840 --> 00:25:41,879 Speaker 1: been there five years earlier, four years earlier, five years earlier. 455 00:25:41,920 --> 00:25:43,600 Speaker 1: So by two thousands time, it's like, oh, this is 456 00:25:43,760 --> 00:25:48,320 Speaker 1: just ridiculous. It's completely corporate. And now I see dispatches 457 00:25:48,359 --> 00:25:51,960 Speaker 1: from there on Twitter in every large brand what Ray 458 00:25:52,119 --> 00:25:54,320 Speaker 1: Dhalio is there. So by the time you have hedge 459 00:25:54,320 --> 00:25:57,359 Speaker 1: funds showing up in south By South and West, I 460 00:25:57,400 --> 00:26:01,240 Speaker 1: think we can say it's a it's just so so so. 461 00:26:01,440 --> 00:26:03,640 Speaker 1: Bencent from Asleep at the Wheel is because I talked 462 00:26:03,680 --> 00:26:07,639 Speaker 1: to right telling you and I would that would be 463 00:26:07,720 --> 00:26:09,720 Speaker 1: a great conversation, wouldn't it. That would be a very 464 00:26:09,760 --> 00:26:12,479 Speaker 1: good This was a good conversation to rarely with us, 465 00:26:12,520 --> 00:26:15,200 Speaker 1: because he darkens the door in the vicinity of ten 466 00:26:15,359 --> 00:26:18,399 Speaker 1: fifteen am every day. Joe Wisen faught with us, and 467 00:26:18,480 --> 00:26:21,960 Speaker 1: of course what you missed among any number of projects 468 00:26:22,080 --> 00:26:40,080 Speaker 1: for Bloomberg. This is an exceptionally timely interview. I'm thrilled 469 00:26:40,160 --> 00:26:43,320 Speaker 1: to say, with Professor Powder and Dr Mann with us 470 00:26:43,359 --> 00:26:46,359 Speaker 1: earlier today from City Group, I forget about it. This 471 00:26:46,520 --> 00:26:48,560 Speaker 1: is the interview of the day. Glenn Hubbard is at 472 00:26:48,600 --> 00:26:52,840 Speaker 1: Columbia Business School. He has been a conservative voice in economics, 473 00:26:53,280 --> 00:26:55,760 Speaker 1: and I heard the hesitancy in his voice as we 474 00:26:55,880 --> 00:26:59,920 Speaker 1: went through um some of the newer conservative economics, particularly 475 00:27:00,080 --> 00:27:03,320 Speaker 1: scene within the Trump administration. Dean Hubbard, of course at 476 00:27:03,359 --> 00:27:07,480 Speaker 1: Columbia Business School and he joins us today. Glenn. I 477 00:27:07,600 --> 00:27:12,520 Speaker 1: spoke to Dr Navarro yesterday and I tried to behave myself, 478 00:27:12,680 --> 00:27:15,919 Speaker 1: but I'll be honest, Glenn. It got a little heated. 479 00:27:16,000 --> 00:27:18,320 Speaker 1: At one point. I said, Look, there's John B. Taylor 480 00:27:18,359 --> 00:27:21,440 Speaker 1: at Stanford, There's Paul Krugerman at Princeton, and they both 481 00:27:21,960 --> 00:27:27,240 Speaker 1: agree they don't agree with Navarro economics. You're on his 482 00:27:27,400 --> 00:27:34,240 Speaker 1: team somewhat. Where is Navarro? Where is ross navarro economics flawed? Well, 483 00:27:34,320 --> 00:27:38,040 Speaker 1: I would start with the problem in the assolutions. On 484 00:27:38,119 --> 00:27:41,199 Speaker 1: the problem front, I think President Trump's got it right 485 00:27:41,320 --> 00:27:45,320 Speaker 1: that China is a global trading problem in intellectual property 486 00:27:45,480 --> 00:27:49,000 Speaker 1: and over capacity. So I don't disagree on the diagnosis. 487 00:27:49,480 --> 00:27:52,640 Speaker 1: The solution is where a part company. So what would 488 00:27:52,680 --> 00:27:56,960 Speaker 1: be needed to address China would be multilateral not unilateral 489 00:27:57,040 --> 00:28:00,679 Speaker 1: action and support for workers here in the Ied States. 490 00:28:01,160 --> 00:28:04,119 Speaker 1: Unfortunately that's not the advice the presidents being given. The 491 00:28:04,880 --> 00:28:07,960 Speaker 1: common feature here, folks of that phrase going to Brad 492 00:28:08,040 --> 00:28:12,119 Speaker 1: DeLong at Berkeley or Dannie Roderick and Glenn Hubbard is 493 00:28:12,240 --> 00:28:15,600 Speaker 1: support for workers, Dr Hobbard, is that where we blew it? 494 00:28:15,840 --> 00:28:18,560 Speaker 1: I mean in Florida, where you grew up as a kid. 495 00:28:19,600 --> 00:28:24,000 Speaker 1: We didn't. We didn't help the workers in Florida crushed 496 00:28:24,040 --> 00:28:27,479 Speaker 1: by globalization? Is that really what happened? I think it's 497 00:28:27,520 --> 00:28:32,080 Speaker 1: globalization and domestic forces. The biggest forces are actually technological change, 498 00:28:32,200 --> 00:28:35,320 Speaker 1: not globalization. We need to help people compete in the 499 00:28:35,400 --> 00:28:39,240 Speaker 1: modern economy, and that's probably going to mean supporting work 500 00:28:39,400 --> 00:28:41,960 Speaker 1: more than we do. We haven't earned income tax credit. 501 00:28:42,480 --> 00:28:45,040 Speaker 1: We could use that and make it larger, especially for 502 00:28:45,120 --> 00:28:48,600 Speaker 1: single workers. We could use wave supports. But if we 503 00:28:48,720 --> 00:28:52,240 Speaker 1: really want to make people support technological change and globalization, 504 00:28:52,680 --> 00:28:54,720 Speaker 1: we have to help them, and we're not. At least 505 00:28:54,760 --> 00:28:56,800 Speaker 1: at Bramant's I can't convey enough how this is a 506 00:28:56,920 --> 00:29:00,680 Speaker 1: common theme through surveillance interviews. Paul phil Verla, who was 507 00:29:00,760 --> 00:29:05,440 Speaker 1: involved in the NAFTA discussions decades ago, is adamant phil 508 00:29:05,560 --> 00:29:08,920 Speaker 1: Verlager got it wrong. Well, Glenn, Dr Hubbard, I'd love 509 00:29:08,960 --> 00:29:10,720 Speaker 1: to get your sense. You said it's important that we 510 00:29:10,840 --> 00:29:16,160 Speaker 1: support work. How do Trump's policies with respect to healthcare 511 00:29:16,320 --> 00:29:21,040 Speaker 1: and with respect to reducing some of the safety blankets 512 00:29:21,240 --> 00:29:25,440 Speaker 1: play into supporting work. Well, I think you have to 513 00:29:25,480 --> 00:29:29,960 Speaker 1: be careful there. It is possible that, uh, adjusting the 514 00:29:30,080 --> 00:29:34,000 Speaker 1: safety net to be more work oriented is actually pro work. 515 00:29:34,480 --> 00:29:37,160 Speaker 1: You just have to follow it up with more direct support. 516 00:29:37,240 --> 00:29:41,040 Speaker 1: It's fine to say let's make benefits more conditional on work, 517 00:29:41,400 --> 00:29:43,440 Speaker 1: but then you've got to help people find that work, 518 00:29:43,840 --> 00:29:45,760 Speaker 1: and you need to support work. I think as a 519 00:29:45,880 --> 00:29:49,720 Speaker 1: as a society, we should want people in the labor force. 520 00:29:50,160 --> 00:29:52,040 Speaker 1: This has been a big issue for the FED as 521 00:29:52,120 --> 00:29:55,000 Speaker 1: well as for the government, and we need to do 522 00:29:55,120 --> 00:29:57,760 Speaker 1: a better job. I think those are the Trump voters 523 00:29:57,800 --> 00:30:00,200 Speaker 1: and we're not really addressing their problem. Okay, are we 524 00:30:00,280 --> 00:30:04,600 Speaker 1: addressing the problem with cutting taxes? Well, yes and no. 525 00:30:05,040 --> 00:30:07,080 Speaker 1: Yes in the sense that it is still true that 526 00:30:07,160 --> 00:30:09,680 Speaker 1: a growing economy is the best Tonic of all. So 527 00:30:10,000 --> 00:30:13,080 Speaker 1: yes in that sense, but no in the more direct 528 00:30:13,240 --> 00:30:16,040 Speaker 1: sense of really helping people get on the ladder of 529 00:30:16,160 --> 00:30:18,520 Speaker 1: work who are struggling. So I don't see it as 530 00:30:18,560 --> 00:30:20,920 Speaker 1: an either or, but both am well. Except that we 531 00:30:21,040 --> 00:30:23,720 Speaker 1: are increasing the deficit by about one and a half 532 00:30:23,800 --> 00:30:26,800 Speaker 1: trillion dollars over the next decade, which is according to 533 00:30:26,920 --> 00:30:30,040 Speaker 1: a number of projections. Doesn't that leave us less less 534 00:30:30,080 --> 00:30:33,320 Speaker 1: ammunition to kind of help support work in other ways? 535 00:30:34,120 --> 00:30:37,160 Speaker 1: I don't think so. We spend a lot of money 536 00:30:37,600 --> 00:30:41,720 Speaker 1: on other ways of supporting work, and variations of unemployment 537 00:30:41,760 --> 00:30:46,200 Speaker 1: insurance and training programs and other things. We can take 538 00:30:46,320 --> 00:30:49,320 Speaker 1: some of this money and support work more directly. So 539 00:30:49,440 --> 00:30:52,080 Speaker 1: I don't think that's really an issue. I think it's 540 00:30:52,120 --> 00:30:55,000 Speaker 1: a lack of attention, to be honest, Neither party has 541 00:30:55,040 --> 00:30:57,880 Speaker 1: focused on help me with the supply side idea that 542 00:30:57,960 --> 00:31:00,760 Speaker 1: we hear from Mr card Low and in others that 543 00:31:00,840 --> 00:31:03,080 Speaker 1: we can just grow our way out of this problem. 544 00:31:03,120 --> 00:31:05,560 Speaker 1: The I S curve is slamming to the right. We've 545 00:31:05,600 --> 00:31:09,240 Speaker 1: got a big tax cut, we've got the fiscal discussion 546 00:31:09,320 --> 00:31:12,320 Speaker 1: that Lisa talks about here. Gene Hubbert, is this just 547 00:31:12,480 --> 00:31:15,840 Speaker 1: all short termism of a national extent and we're going 548 00:31:15,880 --> 00:31:20,240 Speaker 1: to enjoy sub two percent g d P somewhere out there. Well, 549 00:31:20,400 --> 00:31:23,000 Speaker 1: I don't think so. I think that there is a 550 00:31:23,120 --> 00:31:25,840 Speaker 1: short term demand effect of the tax cut, that's the 551 00:31:25,960 --> 00:31:29,280 Speaker 1: deficit effect that came up earlier. The longer term effects 552 00:31:29,320 --> 00:31:32,520 Speaker 1: of the tax reform bill are largely more on the 553 00:31:32,600 --> 00:31:35,840 Speaker 1: supply side. But I think it doesn't really all of that. 554 00:31:36,000 --> 00:31:38,720 Speaker 1: While I agree with everything doesn't really get to the 555 00:31:38,840 --> 00:31:41,680 Speaker 1: point of low wage work. I think that requires more 556 00:31:41,800 --> 00:31:44,960 Speaker 1: direct intervention, and nobody in the White House seems to 557 00:31:45,000 --> 00:31:47,560 Speaker 1: be talking. Is there anybody within the Republican Party that 558 00:31:47,640 --> 00:31:51,600 Speaker 1: can actually affect what should have been done decades ago? Well, 559 00:31:51,720 --> 00:31:55,040 Speaker 1: Paul Ryan has written quite a bit on this, and 560 00:31:55,760 --> 00:31:57,920 Speaker 1: the Ways and Means Committee has done a lot of 561 00:31:58,000 --> 00:32:00,240 Speaker 1: good work that this isn't something that's a rat goal 562 00:32:00,320 --> 00:32:03,320 Speaker 1: idea on either side of the aisle. We should be 563 00:32:03,480 --> 00:32:06,480 Speaker 1: able to do that at Dean Hubbard with us Glenn Hubbard, 564 00:32:06,880 --> 00:32:09,160 Speaker 1: the Columbia Business School. Too much to talk about here. 565 00:32:15,320 --> 00:32:19,400 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 566 00:32:19,560 --> 00:32:24,840 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 567 00:32:24,920 --> 00:32:29,160 Speaker 1: platform you prefer. I'm on Twitter at Tom Keene. Before 568 00:32:29,200 --> 00:32:33,400 Speaker 1: the podcast, you can always catch us worldwide. I'm Bloomberg Radio.