1 00:00:05,120 --> 00:00:07,119 Speaker 1: This is the Bloomberg Surveillance Podcast. 2 00:00:07,160 --> 00:00:11,080 Speaker 2: I'm Tom Keene, along with Jonathan Farrell and Lisa Abramowitz. 3 00:00:11,280 --> 00:00:15,760 Speaker 2: Join us each day for insight from the best an economics, geopolitics, 4 00:00:15,760 --> 00:00:20,720 Speaker 2: finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, 5 00:00:20,960 --> 00:00:25,400 Speaker 2: Spotify and anywhere you get your podcasts, and always on 6 00:00:25,520 --> 00:00:29,840 Speaker 2: Bloomberg dot Com, the Bloomberg Terminal and the Bloomberg Business app. 7 00:00:29,920 --> 00:00:31,440 Speaker 1: Should we get to our guests with sure? 8 00:00:31,520 --> 00:00:34,040 Speaker 3: Choose around the table with this usually on the other 9 00:00:34,120 --> 00:00:36,040 Speaker 3: end of a camera, Anahan, it's been a fit to 10 00:00:36,040 --> 00:00:38,760 Speaker 3: see in person. Thanks for bamdas from whilst fago as 11 00:00:38,800 --> 00:00:41,880 Speaker 3: Tom just moves his autosport magazines. 12 00:00:41,400 --> 00:00:43,680 Speaker 1: Away from a movement. You want to read a card table? 13 00:00:43,720 --> 00:00:46,280 Speaker 1: You have Aston Martin coming up? Do you watch your one? 14 00:00:46,400 --> 00:00:48,400 Speaker 4: I do we spoke of Ballou's Hamilton List. 15 00:00:48,440 --> 00:00:50,800 Speaker 3: You're a Mersiti son, an't you? We'll catch up with 16 00:00:50,800 --> 00:00:53,320 Speaker 3: Aston Martin later this how we'll talk about Fernando, who's 17 00:00:53,400 --> 00:00:54,800 Speaker 3: rumored to be dating Taylor Swift. 18 00:00:54,840 --> 00:00:58,880 Speaker 2: But Fernando is, oh my word, so far behind in 19 00:00:58,920 --> 00:00:59,400 Speaker 2: the gossip. 20 00:00:59,480 --> 00:01:03,400 Speaker 3: On the gossip, the rumor that Fernando is dating Taylor Swift, 21 00:01:03,680 --> 00:01:05,839 Speaker 3: that's a story for another time. The wels Fanco Equity 22 00:01:05,880 --> 00:01:08,720 Speaker 3: strategist joins us now to talk about stocks and a hand. 23 00:01:08,720 --> 00:01:11,120 Speaker 3: You're and a team Chris Harvey leading the way for 24 00:01:11,160 --> 00:01:14,280 Speaker 3: equities at WEWES looking for a ten percent correction at 25 00:01:14,280 --> 00:01:16,840 Speaker 3: the headline sm P five hundred. What is it that 26 00:01:16,880 --> 00:01:18,280 Speaker 3: you see that's going to lead to that correction? 27 00:01:18,920 --> 00:01:22,120 Speaker 4: We're seeing really margin compression. We think that earnings are slowing, 28 00:01:22,400 --> 00:01:24,840 Speaker 4: and right now where earning's projections are as we go 29 00:01:24,920 --> 00:01:28,039 Speaker 4: through Q one reporting, they continue to believe pretty much 30 00:01:28,040 --> 00:01:30,160 Speaker 4: a flat growth year over year for the S and 31 00:01:30,200 --> 00:01:33,200 Speaker 4: P five hundred, we think that's too optimistic. So we're 32 00:01:33,240 --> 00:01:37,040 Speaker 4: bringing our EPs number down about ten percent contraction and 33 00:01:37,080 --> 00:01:40,520 Speaker 4: EPs growth. We think that's very reasonable in an environment 34 00:01:40,560 --> 00:01:45,800 Speaker 4: that you expect GDP growth, slowing consumer and still inflationary pressure. 35 00:01:45,920 --> 00:01:47,920 Speaker 4: So you put that in, you tack on still a 36 00:01:47,960 --> 00:01:51,520 Speaker 4: pretty reasonable multiple of eighteen half That brings us lower. 37 00:01:51,640 --> 00:01:54,720 Speaker 3: How does tech absolutely crushing it over the last week 38 00:01:55,000 --> 00:01:55,919 Speaker 3: factor into your. 39 00:01:55,800 --> 00:01:58,840 Speaker 4: Cod Absolutely something we're watching, but we think that it's 40 00:01:58,880 --> 00:02:01,280 Speaker 4: getting a little ahead of itself. Right now you are 41 00:02:01,320 --> 00:02:04,520 Speaker 4: seeing as well, why is that running ahead of itself? 42 00:02:04,560 --> 00:02:07,120 Speaker 4: The yield markets you're down with the ten year round 43 00:02:07,160 --> 00:02:10,440 Speaker 4: three a half. That is a move already expecting FED cuts. 44 00:02:10,480 --> 00:02:14,200 Speaker 4: The market is expecting cuts after this meeting, and again 45 00:02:14,360 --> 00:02:16,880 Speaker 4: that's just too soon for us. I think that realization 46 00:02:17,280 --> 00:02:21,760 Speaker 4: and people having to move forward or out their expectation 47 00:02:21,840 --> 00:02:24,519 Speaker 4: for monetary easing is going to make things a little 48 00:02:24,560 --> 00:02:25,800 Speaker 4: tougher in this summer. 49 00:02:26,040 --> 00:02:28,760 Speaker 2: To challenge your mathiveness at Yale, and I'm thinking now 50 00:02:28,800 --> 00:02:32,280 Speaker 2: seeing Tela, the great quant finance guru, on the tail 51 00:02:32,360 --> 00:02:34,280 Speaker 2: risks out there. If I look at the tails of 52 00:02:34,320 --> 00:02:37,160 Speaker 2: the distribution, the risks of the distribution good and bad 53 00:02:37,680 --> 00:02:40,360 Speaker 2: out to next year, can you see them or is 54 00:02:40,360 --> 00:02:41,839 Speaker 2: it as opaque as you've ever seen? 55 00:02:42,360 --> 00:02:44,880 Speaker 4: I certainly think there are things top of mind, actually, 56 00:02:44,919 --> 00:02:47,840 Speaker 4: and that's what's got things so interesting. We know what 57 00:02:47,960 --> 00:02:50,000 Speaker 4: to look at, which is not sure how to weigh 58 00:02:50,080 --> 00:02:52,880 Speaker 4: each one. For example, we're looking at the commercial real 59 00:02:53,000 --> 00:02:55,519 Speaker 4: estate space that's been a hot topic. What's going to 60 00:02:55,560 --> 00:02:58,040 Speaker 4: happen if those loans can't get renewed? Another one is 61 00:02:58,160 --> 00:03:01,480 Speaker 4: student loans. How does that impact consumer spending if student 62 00:03:01,520 --> 00:03:04,760 Speaker 4: loans don't get dismissed. We're looking at these kind of 63 00:03:04,800 --> 00:03:08,000 Speaker 4: factors and as well, what if the FED really doesn't 64 00:03:08,000 --> 00:03:10,959 Speaker 4: start cutting. What if they just pause and hold Because. 65 00:03:10,760 --> 00:03:13,799 Speaker 2: Of the litany of worries that all of our listeners 66 00:03:13,800 --> 00:03:15,920 Speaker 2: and viewers have, there's got to be a good side 67 00:03:15,919 --> 00:03:18,040 Speaker 2: of this, and that the SPX is recovered from a 68 00:03:18,080 --> 00:03:20,600 Speaker 2: great bear market. We're back to negative three percent whatever 69 00:03:20,600 --> 00:03:25,080 Speaker 2: it is, twelve months trailing. You're basically saying, take the 70 00:03:25,120 --> 00:03:27,280 Speaker 2: summer off and take the rest of the year off. 71 00:03:27,360 --> 00:03:28,280 Speaker 1: Right when you. 72 00:03:28,280 --> 00:03:32,560 Speaker 2: Take the summer off under Anahan Wells Fargo economics, do 73 00:03:32,600 --> 00:03:36,360 Speaker 2: you go to cash? How do you take the summer off? 74 00:03:36,400 --> 00:03:37,080 Speaker 1: Based on your. 75 00:03:37,000 --> 00:03:39,880 Speaker 4: Forty two hundred call, I think actually, rather than go 76 00:03:40,000 --> 00:03:42,640 Speaker 4: full cash, we're not that bearish yet. We do think 77 00:03:42,680 --> 00:03:45,920 Speaker 4: you can weather through this by looking at those secular growers. 78 00:03:45,960 --> 00:03:48,560 Speaker 4: I still think there's opportunity. And you look in the 79 00:03:48,560 --> 00:03:51,400 Speaker 4: cab good space as well, for example, and you're seeing 80 00:03:51,440 --> 00:03:54,640 Speaker 4: that volumes are actually holding up, and all other sectors, 81 00:03:54,760 --> 00:03:58,000 Speaker 4: especially even in something like staples like food area, you're 82 00:03:58,000 --> 00:04:01,600 Speaker 4: seeing volumes shrink. So there'll are opportunities to keep that 83 00:04:01,720 --> 00:04:04,320 Speaker 4: growth to plow through what could be that rough summer 84 00:04:04,320 --> 00:04:04,840 Speaker 4: we talked about. 85 00:04:04,880 --> 00:04:08,000 Speaker 3: And know it's difficult to identify specific names with you 86 00:04:08,080 --> 00:04:09,880 Speaker 3: so I'm going to be delicate about asking this question. 87 00:04:10,520 --> 00:04:13,880 Speaker 3: Are the cloud name secular grower is still oh? 88 00:04:13,920 --> 00:04:17,040 Speaker 4: Well, you know, as someone who believes in that technology 89 00:04:17,080 --> 00:04:19,400 Speaker 4: and certainly uses it and believes in the computing power 90 00:04:19,440 --> 00:04:22,160 Speaker 4: of it, I do still think that there's growth opportunities. 91 00:04:22,360 --> 00:04:25,120 Speaker 4: But like we said, especially with the software spin tech 92 00:04:25,160 --> 00:04:28,440 Speaker 4: itself overall has had such a hot run, It's not 93 00:04:28,520 --> 00:04:32,239 Speaker 4: somewhere where I'm ready to really pour in the investments now. 94 00:04:32,320 --> 00:04:34,200 Speaker 3: So what is a secular growth story that you do 95 00:04:34,279 --> 00:04:35,440 Speaker 3: want to get behind at the moment. 96 00:04:36,000 --> 00:04:38,160 Speaker 4: So besides the cop good space where we do like 97 00:04:38,240 --> 00:04:40,920 Speaker 4: as well, media and entertainment, and now again that too 98 00:04:40,960 --> 00:04:43,360 Speaker 4: has had a great start to the year. We still 99 00:04:43,400 --> 00:04:46,200 Speaker 4: think that it's attractive. We still think there's opportunities, and 100 00:04:46,480 --> 00:04:48,720 Speaker 4: a lot of it is thinking about where consumers will 101 00:04:48,760 --> 00:04:51,400 Speaker 4: continue to spend even as they have to tighten the belt, 102 00:04:51,560 --> 00:04:54,120 Speaker 4: and part of that is really in the experiences in 103 00:04:54,160 --> 00:04:56,080 Speaker 4: the services that they can enjoy. 104 00:04:56,360 --> 00:04:58,240 Speaker 3: Can we get an extra level of detail here, is 105 00:04:58,240 --> 00:05:01,400 Speaker 3: this Tom spending more money on streat gaps? What exactly 106 00:05:01,480 --> 00:05:02,279 Speaker 3: you're talking about? 107 00:05:02,720 --> 00:05:04,719 Speaker 4: It could be him watching a more f one and 108 00:05:04,760 --> 00:05:08,200 Speaker 4: spending there. That certainly is true. There is that push. 109 00:05:08,400 --> 00:05:10,760 Speaker 4: But again it's more of what is going to relatively 110 00:05:10,800 --> 00:05:14,320 Speaker 4: outperform when people start pulling back on their spending, pulling 111 00:05:14,360 --> 00:05:17,240 Speaker 4: back on the revenge travel spending year, talking about how 112 00:05:17,240 --> 00:05:19,279 Speaker 4: those prices in airlines are still expensive. 113 00:05:19,360 --> 00:05:21,800 Speaker 3: So you think the airline story is done? Is can 114 00:05:21,880 --> 00:05:23,800 Speaker 3: I go that far? Do you think it's done? 115 00:05:24,040 --> 00:05:26,360 Speaker 4: I wouldn't say it's done, but it's not somewhere where 116 00:05:26,360 --> 00:05:28,320 Speaker 4: if I had cash to put to work, where I 117 00:05:28,320 --> 00:05:29,680 Speaker 4: would rotate into right. 118 00:05:29,560 --> 00:05:31,960 Speaker 3: Now, Okay, that sounds like it's done. 119 00:05:32,279 --> 00:05:34,360 Speaker 2: You know, I look at the Wells Fargo economic call, 120 00:05:34,720 --> 00:05:40,479 Speaker 2: and you know your economics team looking at where GDP is. 121 00:05:40,480 --> 00:05:43,360 Speaker 2: Is there enough nominal GDP to keep this game going? 122 00:05:43,400 --> 00:05:45,000 Speaker 2: To me, that's the heart of the matter. How do 123 00:05:45,040 --> 00:05:48,600 Speaker 2: you fold in Wells Fargo economics into your equity analysis. 124 00:05:48,800 --> 00:05:52,440 Speaker 4: So our expectation for actually GDP growth is just above 125 00:05:52,480 --> 00:05:54,919 Speaker 4: one percent for this year, but pretty much a flat 126 00:05:54,920 --> 00:05:57,640 Speaker 4: twenty twenty four, and that is concerning. But I think 127 00:05:57,720 --> 00:06:00,000 Speaker 4: the sharpest pain points where we see the most GDP 128 00:06:00,200 --> 00:06:03,440 Speaker 4: contraction is four Q and one Q. Four Q this 129 00:06:03,560 --> 00:06:05,919 Speaker 4: year and the beginning of next year is going to 130 00:06:05,920 --> 00:06:09,400 Speaker 4: be the toughest drop in GDP. But that doesn't necessarily 131 00:06:09,440 --> 00:06:13,240 Speaker 4: align with when we expect to see the toughest earnings contraction. 132 00:06:13,600 --> 00:06:16,200 Speaker 3: Okay, just to be specific about that, just final question, 133 00:06:16,279 --> 00:06:18,800 Speaker 3: when is that Ernie's contraction. What's the window that you 134 00:06:18,839 --> 00:06:19,800 Speaker 3: and a team you're looking for. 135 00:06:20,120 --> 00:06:22,280 Speaker 4: We think, really it's this year, and we think it's 136 00:06:22,279 --> 00:06:25,320 Speaker 4: already occurring. You already have been seeing those margins come 137 00:06:25,400 --> 00:06:28,240 Speaker 4: under pressure and you've seen that four Q last year 138 00:06:28,279 --> 00:06:30,680 Speaker 4: earnings came in a little lower than projected. I think 139 00:06:30,720 --> 00:06:33,520 Speaker 4: that continues and these are the quarters now where it's 140 00:06:33,520 --> 00:06:36,400 Speaker 4: going to be toughest. That realization is what's going to 141 00:06:36,440 --> 00:06:39,880 Speaker 4: push equity multiples and equity levels lower. 142 00:06:40,000 --> 00:06:41,719 Speaker 3: And a hand of Wes Faga and a great to 143 00:06:41,720 --> 00:06:43,919 Speaker 3: do this in person. Wonderful, really good to see you. 144 00:06:44,000 --> 00:06:46,120 Speaker 3: Thank you. The team at West Fago looking for a 145 00:06:46,120 --> 00:06:49,000 Speaker 3: ten percent correction in the next three to six months 146 00:06:49,400 --> 00:06:50,680 Speaker 3: off the back of earnings. 147 00:06:54,240 --> 00:06:55,839 Speaker 1: Where the snow and he's helped us so much. 148 00:06:55,839 --> 00:06:58,760 Speaker 2: I think of Ken Leon over at CEFII, Michael Mayo 149 00:06:59,160 --> 00:07:02,240 Speaker 2: when we can dress him in Gerard Cassidy up early 150 00:07:02,279 --> 00:07:05,240 Speaker 2: in London, had a US bank equity strategy at the 151 00:07:05,279 --> 00:07:09,080 Speaker 2: Royal Bank of Canada, and we welcome him this morning, Gerard, 152 00:07:09,120 --> 00:07:11,000 Speaker 2: I'm gonna go to the PowerPoint. I thought it was 153 00:07:11,040 --> 00:07:14,880 Speaker 2: really quite nicely done by JP Morgan. I'm service massage 154 00:07:14,920 --> 00:07:17,760 Speaker 2: by his staff of forty two. And buried at the 155 00:07:17,760 --> 00:07:22,200 Speaker 2: bottom was an internal rate to return guestament of twenty percent. 156 00:07:22,400 --> 00:07:24,200 Speaker 2: You and I aren't going to go to an iterative 157 00:07:25,640 --> 00:07:28,920 Speaker 2: discussion of the equation, but I fell off my chair. 158 00:07:29,400 --> 00:07:32,320 Speaker 2: Is this really an IRR twenty percent? Is it that 159 00:07:32,440 --> 00:07:36,320 Speaker 2: lucrative for Fortress Diamond, Tom? 160 00:07:36,360 --> 00:07:36,720 Speaker 1: It is? 161 00:07:36,880 --> 00:07:39,280 Speaker 5: And thank you for having me on the program from 162 00:07:39,280 --> 00:07:42,160 Speaker 5: London here, And I would point out that one of 163 00:07:42,200 --> 00:07:45,520 Speaker 5: the reasons the internal rate of return is so strong 164 00:07:46,040 --> 00:07:49,440 Speaker 5: is that in an agreement with the FDIC, which is 165 00:07:49,560 --> 00:07:53,400 Speaker 5: very common the FDIC, when they sell these banks out 166 00:07:53,400 --> 00:07:57,160 Speaker 5: of receivership, we'll take a law sharing agreement with the buyer. 167 00:07:57,800 --> 00:08:00,000 Speaker 5: As a result, when you have one of those laws 168 00:08:00,000 --> 00:08:03,240 Speaker 5: sharing agreements, the amount of capital that the bank is 169 00:08:03,280 --> 00:08:06,960 Speaker 5: required to hold against those assets goes down. And that's 170 00:08:07,040 --> 00:08:09,840 Speaker 5: one of the reasons the IRR is as strong as 171 00:08:09,840 --> 00:08:10,160 Speaker 5: it is. 172 00:08:10,760 --> 00:08:14,080 Speaker 2: What kind of pop do you calculate, JP Morgan will 173 00:08:14,120 --> 00:08:17,880 Speaker 2: get if interest rates actually come in, if we disinvert, 174 00:08:18,360 --> 00:08:20,880 Speaker 2: if we get ourselves back to some form of normal 175 00:08:21,000 --> 00:08:24,720 Speaker 2: interst rate structure. To me, it's an incalculable delta. It's 176 00:08:24,800 --> 00:08:29,520 Speaker 2: just a huge number if they get the markets to cooperate, you. 177 00:08:29,480 --> 00:08:31,320 Speaker 5: Know, and Tom, you really put your thumb on it, 178 00:08:31,400 --> 00:08:34,360 Speaker 5: because if you go back to ninety four ninety five, 179 00:08:34,400 --> 00:08:36,959 Speaker 5: and I'm not suggesting we're going to have that Goldilocks 180 00:08:37,240 --> 00:08:40,600 Speaker 5: economy we had in ninety five, but Greensman took rates 181 00:08:40,679 --> 00:08:43,440 Speaker 5: up from three to six percent and we didn't have 182 00:08:43,480 --> 00:08:47,400 Speaker 5: a recession, and then he started cutting rates in ninety five. 183 00:08:47,720 --> 00:08:50,360 Speaker 5: The bank stocks were up fifty five percent that year. 184 00:08:50,640 --> 00:08:53,360 Speaker 5: So if we don't have a big recession as many 185 00:08:53,400 --> 00:08:56,400 Speaker 5: people think we are going to have, the credit problems 186 00:08:56,400 --> 00:08:58,840 Speaker 5: for the banks will not be that severe and rates 187 00:08:58,880 --> 00:09:01,200 Speaker 5: will start coming down probably next year. 188 00:09:01,559 --> 00:09:03,840 Speaker 2: You and I studied at the altar of Henry Kaufman. 189 00:09:03,920 --> 00:09:06,400 Speaker 2: He was so kind to me when I first joined Bloomberg. 190 00:09:06,480 --> 00:09:10,360 Speaker 2: Mister Cassidy. Henry Kaufman is quoted by John Authurs, Folks, 191 00:09:10,440 --> 00:09:13,920 Speaker 2: Matt Levine, John Authors. Read them today if you're part 192 00:09:13,960 --> 00:09:17,720 Speaker 2: of Global at Wall Street. Mister Authors talks about Kaufman 193 00:09:18,240 --> 00:09:21,839 Speaker 2: is a quasi public utility. Is that what we've gotten 194 00:09:21,880 --> 00:09:24,960 Speaker 2: now with a combination of JP Morgan and Bank of America. 195 00:09:25,080 --> 00:09:26,440 Speaker 1: Are they a public utility? 196 00:09:28,120 --> 00:09:31,800 Speaker 5: Tommy, You know, I wouldn't refrain too much from saying that, 197 00:09:31,840 --> 00:09:35,080 Speaker 5: but other than to say the financial utilities, and that's 198 00:09:35,080 --> 00:09:37,960 Speaker 5: not a negative that it's a positive. If we could 199 00:09:38,000 --> 00:09:42,200 Speaker 5: have banks that consistently pay their dividends through the cycle 200 00:09:42,559 --> 00:09:46,520 Speaker 5: and also deliver you know, mid to lower teens ro 201 00:09:47,600 --> 00:09:51,360 Speaker 5: return on tangible common equity, those are very attractive returns, 202 00:09:51,520 --> 00:09:55,439 Speaker 5: So you could call them financial utilities, in my opinion. 203 00:09:55,200 --> 00:09:57,800 Speaker 3: Great for Shahoudis. I want to it's great for customers. 204 00:09:57,880 --> 00:09:58,120 Speaker 1: Jared. 205 00:09:58,200 --> 00:10:01,720 Speaker 3: Let's talk about that the deposit that they're assuming JP 206 00:10:01,840 --> 00:10:04,720 Speaker 3: Morgan from First Republic. You asked about this on the 207 00:10:04,760 --> 00:10:07,640 Speaker 3: call yesterday, Jared, how do those deposits repriced? Did you 208 00:10:07,640 --> 00:10:08,960 Speaker 3: get some clarity on that. 209 00:10:10,600 --> 00:10:14,880 Speaker 5: John, What happens normally in bank failures. Quite often the 210 00:10:15,000 --> 00:10:19,439 Speaker 5: acquirers are able to renegotiate down those rates of interest 211 00:10:19,520 --> 00:10:23,160 Speaker 5: on those deposits, not the term CDs. Those are contractual. 212 00:10:23,440 --> 00:10:26,120 Speaker 5: But that was the reason for the question, because that 213 00:10:26,280 --> 00:10:30,680 Speaker 5: makes the deal even more attractive. To know, JP Morgan 214 00:10:30,760 --> 00:10:32,640 Speaker 5: and quite often, and I'm not saying this happened with 215 00:10:32,760 --> 00:10:35,880 Speaker 5: First Republic. But quite often what happens when these banks 216 00:10:36,120 --> 00:10:39,480 Speaker 5: head into receivership they have to pay up for deposits 217 00:10:39,600 --> 00:10:42,320 Speaker 5: to bring money in. That's why the buyers get to 218 00:10:42,400 --> 00:10:46,080 Speaker 5: reprice them downwards. What makes it more profitable for the buyer. 219 00:10:46,240 --> 00:10:48,440 Speaker 3: I left the way that Jeremy Bonnham, the CFO of 220 00:10:48,520 --> 00:10:52,000 Speaker 3: JP Morgan, addressed this. Listen to this language. I think 221 00:10:52,040 --> 00:10:54,760 Speaker 3: the reprice experience will blend over time into the rest 222 00:10:54,760 --> 00:10:56,600 Speaker 3: of our deposit franchise. Do you know what that means? 223 00:10:56,640 --> 00:10:56,840 Speaker 1: Tom? 224 00:10:57,520 --> 00:10:59,600 Speaker 3: Their deposits and their rate of return will come down 225 00:10:59,600 --> 00:11:02,560 Speaker 3: to zero over time because I've got JP Morgan, John, 226 00:11:02,600 --> 00:11:05,720 Speaker 3: They're not paying much for deposits and they don't need to. Jod, 227 00:11:05,800 --> 00:11:09,160 Speaker 3: I was wondering yesterday whether you thought they were downplaying 228 00:11:09,200 --> 00:11:12,440 Speaker 3: to some extent for pr reasons, just how profitable this 229 00:11:12,520 --> 00:11:16,040 Speaker 3: deal might be for JP Morgan, John. 230 00:11:16,160 --> 00:11:17,400 Speaker 1: I think you said it well. 231 00:11:17,480 --> 00:11:21,199 Speaker 5: I think it's an extremely profitable deal for JP Morgan. 232 00:11:21,800 --> 00:11:25,360 Speaker 5: Their size and their strength gave them the advantage. We 233 00:11:25,400 --> 00:11:28,720 Speaker 5: wrote last night in our research note on this transaction 234 00:11:29,160 --> 00:11:33,360 Speaker 5: that the prior to transactions, the loans were marked to 235 00:11:33,520 --> 00:11:37,120 Speaker 5: market to about seventy seven cents on the dollar and 236 00:11:37,200 --> 00:11:39,800 Speaker 5: in the case of JP Morgan yesterday they marked them 237 00:11:39,800 --> 00:11:42,199 Speaker 5: to eighty three cents on the dollar, so they didn't 238 00:11:42,200 --> 00:11:44,800 Speaker 5: have to be as aggressive as maybe some of the 239 00:11:44,840 --> 00:11:47,199 Speaker 5: other bidders who were bidding on this, and that was 240 00:11:47,240 --> 00:11:48,360 Speaker 5: an advantage they had. 241 00:11:48,559 --> 00:11:51,200 Speaker 2: There's the math, folks, you get it from Joad Cassidy, 242 00:11:51,280 --> 00:11:53,319 Speaker 2: not from us. We go to the pros and John, 243 00:11:53,679 --> 00:11:56,240 Speaker 2: you got a bond at par or a loan at 244 00:11:56,280 --> 00:11:59,280 Speaker 2: par down to seventy seven cents and JP Morgan paid 245 00:11:59,320 --> 00:12:00,280 Speaker 2: up where the others. 246 00:12:00,360 --> 00:12:03,359 Speaker 3: So, Jared, I've got experience of dealing with distressed institutions 247 00:12:03,520 --> 00:12:07,400 Speaker 3: Washington Mutual bad Jamie, time has been that done that, Judge, 248 00:12:07,440 --> 00:12:10,040 Speaker 3: you addressed that question as well. Why is this so 249 00:12:10,160 --> 00:12:12,680 Speaker 3: different and why in five years want me to be 250 00:12:12,679 --> 00:12:15,680 Speaker 3: sitting care rethinking everything we've just said in the last 251 00:12:15,679 --> 00:12:16,559 Speaker 3: twenty four hours. 252 00:12:18,160 --> 00:12:22,400 Speaker 5: John, the major difference in Jamie Diamond addressed this yesterday 253 00:12:22,400 --> 00:12:25,679 Speaker 5: to my question as well, which is this was a 254 00:12:25,720 --> 00:12:31,120 Speaker 5: deposit flight deposit run problem. It was a classic duration 255 00:12:31,280 --> 00:12:35,840 Speaker 5: issue of long assets on duration short umfunding. This was 256 00:12:35,920 --> 00:12:39,080 Speaker 5: not a credit problem, and that and First Republic had 257 00:12:39,200 --> 00:12:42,480 Speaker 5: pristine credit and I would suggest that this is a 258 00:12:42,800 --> 00:12:46,080 Speaker 5: very different situation As a result, it's not as risky 259 00:12:46,360 --> 00:12:49,320 Speaker 5: for JP Morgan and the others because this is a 260 00:12:49,400 --> 00:12:52,920 Speaker 5: mismatch of assets versus liabilities, and they're now going to 261 00:12:52,960 --> 00:12:56,480 Speaker 5: benefit from the marketing of market of those assets and 262 00:12:56,480 --> 00:12:57,800 Speaker 5: the yields that that creates. 263 00:12:58,080 --> 00:13:00,439 Speaker 3: George wonderful coutage. As a wise, I'm going to see 264 00:13:00,480 --> 00:13:03,080 Speaker 3: you in London as well, Jared Cassidy that of obviously 265 00:13:03,120 --> 00:13:04,760 Speaker 3: Capital Marcus. Thank you Jered. 266 00:13:15,160 --> 00:13:16,200 Speaker 1: Right now and this is a joy. 267 00:13:16,240 --> 00:13:19,840 Speaker 2: As John and I continue our coverage of this banking crisis, 268 00:13:20,280 --> 00:13:22,920 Speaker 2: it pays to have somebody with real worlds experience. He 269 00:13:23,080 --> 00:13:27,800 Speaker 2: is global Currency's an interest rate strategy at Australia's Macquarie, 270 00:13:27,800 --> 00:13:30,600 Speaker 2: but far more Terry Weisman is something that has lived 271 00:13:30,800 --> 00:13:33,400 Speaker 2: what so many other people are doing. I want to 272 00:13:33,440 --> 00:13:37,360 Speaker 2: go back to Alan Schwartz, David Malpass, John writing you 273 00:13:37,760 --> 00:13:40,960 Speaker 2: emishioh and it blew up in March of two thousand 274 00:13:41,000 --> 00:13:44,679 Speaker 2: and eight at bear Stearns. From your distance, but your 275 00:13:44,800 --> 00:13:49,680 Speaker 2: tangible experience of collapse. How is JP Morgan different in 276 00:13:49,840 --> 00:13:53,400 Speaker 2: two thousand and eight than JP Morgan is in twenty 277 00:13:53,520 --> 00:13:54,240 Speaker 2: twenty three. 278 00:13:54,840 --> 00:13:57,080 Speaker 6: Let me instead speaking about JP Morgan, Tom, let me 279 00:13:57,080 --> 00:14:00,559 Speaker 6: just talk about the banking pastor generally, thousand and eight 280 00:14:00,679 --> 00:14:03,440 Speaker 6: was I think qualitatively different than the situation we're seeing 281 00:14:03,440 --> 00:14:05,600 Speaker 6: now for the banks in the United States. In two 282 00:14:05,640 --> 00:14:08,240 Speaker 6: thousand and eight, you had a situation where the primary 283 00:14:08,280 --> 00:14:11,280 Speaker 6: problem at the banks was the asset side of the 284 00:14:11,280 --> 00:14:14,800 Speaker 6: balance sheet. It was generally a situation where there were 285 00:14:14,880 --> 00:14:17,920 Speaker 6: too many mortgages that went bad too quickly. That's an 286 00:14:17,920 --> 00:14:22,120 Speaker 6: asset side problem, it's a collateral side problem. What we're 287 00:14:22,120 --> 00:14:25,240 Speaker 6: seeing now is different. What we're seeing now primarily is 288 00:14:25,320 --> 00:14:28,280 Speaker 6: deposit flight. In other words, it's a liability side problem. 289 00:14:28,440 --> 00:14:30,640 Speaker 6: It's lack of confidence in the banks. Yes, it may 290 00:14:30,640 --> 00:14:32,720 Speaker 6: be lack of confidence in the banks because people are 291 00:14:32,720 --> 00:14:36,840 Speaker 6: worried about their ability to continue to honor their obligations, 292 00:14:36,840 --> 00:14:40,000 Speaker 6: their liabilities, their deposits. But nonetheless, this is a crisis 293 00:14:40,000 --> 00:14:42,520 Speaker 6: that has started from the liability side, and I think 294 00:14:42,560 --> 00:14:45,120 Speaker 6: that makes it qualitatively different. It actually makes it easier 295 00:14:45,160 --> 00:14:48,760 Speaker 6: for entities like the Federal Reserve to solve because the 296 00:14:48,760 --> 00:14:52,080 Speaker 6: Federal Reserve has backstops. It could come in and replace 297 00:14:52,360 --> 00:14:55,760 Speaker 6: the liability side that the banks are losing. Right if 298 00:14:55,760 --> 00:14:57,920 Speaker 6: at the one dollars deposits leaves, the bank can simply 299 00:14:57,960 --> 00:14:59,920 Speaker 6: go to the FED and borrow from on the Prime 300 00:15:00,480 --> 00:15:03,720 Speaker 6: Credit Facility or from the new BTFP and get that 301 00:15:03,760 --> 00:15:06,360 Speaker 6: dollar back, rebuild its base of liabilities, and continue to 302 00:15:06,400 --> 00:15:09,000 Speaker 6: do what it's doing. So I think this is qualitatively 303 00:15:09,000 --> 00:15:10,480 Speaker 6: different than two thousand. 304 00:15:10,120 --> 00:15:14,720 Speaker 2: And eight, And can interest rates assist government institutions? And 305 00:15:14,760 --> 00:15:18,920 Speaker 2: can interest rates assist JP Morgan here by getting the 306 00:15:18,960 --> 00:15:21,520 Speaker 2: win behind him over the next one two and five 307 00:15:21,640 --> 00:15:23,120 Speaker 2: years to make this easier. 308 00:15:23,160 --> 00:15:27,080 Speaker 6: There's nothing better in promoting confidence than economic growth, nominal 309 00:15:27,120 --> 00:15:30,760 Speaker 6: income growth, certainly, because obligations are typically in nominal terms. 310 00:15:30,920 --> 00:15:32,560 Speaker 6: But if you can't get nominal growth, you might as 311 00:15:32,560 --> 00:15:35,040 Speaker 6: well just get real growth. I guess the question comes 312 00:15:35,040 --> 00:15:37,240 Speaker 6: down to do lower interest rates help growth? I think 313 00:15:37,280 --> 00:15:40,920 Speaker 6: they do right. If the Fed were to lower interest 314 00:15:41,000 --> 00:15:43,760 Speaker 6: rates these days, certainly you would get some inflation, presumably, 315 00:15:44,040 --> 00:15:46,000 Speaker 6: but that would be coincident with nominal growth. It would 316 00:15:46,000 --> 00:15:50,200 Speaker 6: help corporations, bank and every obligator in the economy honor 317 00:15:50,240 --> 00:15:53,720 Speaker 6: those obligations, honor their debts. I think that would reduce 318 00:15:53,760 --> 00:15:55,280 Speaker 6: the amount of financial stress in the economy. 319 00:15:55,360 --> 00:15:58,600 Speaker 3: Let's talk about something that's not promoting confidence. The debts 320 00:15:58,640 --> 00:16:02,120 Speaker 3: samely divide down in Washington, people are already exhausted about it, 321 00:16:02,120 --> 00:16:05,360 Speaker 3: and negotiations haven't really even started to get going. Now, Terry, 322 00:16:05,360 --> 00:16:07,160 Speaker 3: you've got a different view on this. Can you just 323 00:16:07,160 --> 00:16:08,720 Speaker 3: walk us through piece by piece? And we have time 324 00:16:08,760 --> 00:16:10,800 Speaker 3: to do this, so just go through peace by piece. 325 00:16:10,840 --> 00:16:13,400 Speaker 3: Why you think this can get addressed. 326 00:16:13,040 --> 00:16:16,200 Speaker 6: Well, first of all, we've had examples of a debt 327 00:16:16,240 --> 00:16:19,160 Speaker 6: sealing crisis in the past before and they have found resolution. Now, 328 00:16:19,160 --> 00:16:20,440 Speaker 6: I'm not going to say that this is the same, 329 00:16:20,920 --> 00:16:23,120 Speaker 6: but I think the differences today are political, they're not 330 00:16:23,160 --> 00:16:25,960 Speaker 6: really economic. Why do I say that, Because Kevin McCarthy 331 00:16:26,480 --> 00:16:29,280 Speaker 6: wanted the acclamation of his party to become speaker, and 332 00:16:29,280 --> 00:16:31,640 Speaker 6: he had to make certain promises. And among the promises 333 00:16:31,680 --> 00:16:34,560 Speaker 6: he made, given that this was January and we were 334 00:16:34,600 --> 00:16:37,200 Speaker 6: already coming up against the dead ceiling, Janet Yellen had 335 00:16:37,200 --> 00:16:39,240 Speaker 6: said so in January, one of the promises he made 336 00:16:39,280 --> 00:16:41,200 Speaker 6: was that he wasn't going to back down with respect 337 00:16:41,240 --> 00:16:43,600 Speaker 6: to getting out of the administration what he wants in 338 00:16:43,680 --> 00:16:47,320 Speaker 6: terms of spending cuts if he's going to go with 339 00:16:47,440 --> 00:16:51,960 Speaker 6: a debt sealing increase. Unfortunately, he got the speakership, and 340 00:16:52,000 --> 00:16:54,440 Speaker 6: now he painted himself in a quarter because he made 341 00:16:54,480 --> 00:16:57,480 Speaker 6: that promise to his caucus, and he can't really back 342 00:16:57,520 --> 00:17:01,880 Speaker 6: out that easily. So now you have a a stone 343 00:17:01,960 --> 00:17:04,520 Speaker 6: heartstone coming up against a hard wall, etc. You've got 344 00:17:04,560 --> 00:17:08,680 Speaker 6: two intransigent sides. I actually think that we might come 345 00:17:08,720 --> 00:17:10,679 Speaker 6: down to the wire, and I actually think that the 346 00:17:10,720 --> 00:17:13,320 Speaker 6: way we may resolve this is not to the traditional 347 00:17:13,359 --> 00:17:17,760 Speaker 6: means of a debate and negotiation that results in a compromise. 348 00:17:18,359 --> 00:17:21,200 Speaker 6: I think we may approach a crisis. But I think 349 00:17:21,240 --> 00:17:24,760 Speaker 6: the cleaner solution here I get to if we don't 350 00:17:24,800 --> 00:17:27,520 Speaker 6: get to a political resolution, is simply for the US 351 00:17:27,600 --> 00:17:29,600 Speaker 6: Treasury to continue to do what it's doing, i e. 352 00:17:29,720 --> 00:17:33,879 Speaker 6: Issue debt and get challenged in the courts by the opposition. 353 00:17:33,920 --> 00:17:36,239 Speaker 6: Now remember they've already passed the spending, so there's some 354 00:17:36,359 --> 00:17:38,359 Speaker 6: legal basis for the view that they have to issue 355 00:17:38,359 --> 00:17:40,359 Speaker 6: the debt to support that spending, because that was a 356 00:17:40,359 --> 00:17:43,160 Speaker 6: bill that was passed. But what happened to that that point, well, 357 00:17:43,480 --> 00:17:45,360 Speaker 6: I think it will go immediately to the Supreme Court. 358 00:17:45,400 --> 00:17:47,480 Speaker 6: I think the Supreme Court could issue an injunction. I 359 00:17:47,480 --> 00:17:49,520 Speaker 6: think the Supreme Court has legal basis for doing that. 360 00:17:49,600 --> 00:17:52,920 Speaker 6: They have amended fourteen Section four says the debt of 361 00:17:52,920 --> 00:17:55,439 Speaker 6: the United States will not be questioned, and that's a 362 00:17:55,480 --> 00:17:58,320 Speaker 6: legal basis for telling the administration you can do what 363 00:17:58,359 --> 00:18:00,560 Speaker 6: you want. And if that happens, by the way, it'll 364 00:18:00,560 --> 00:18:04,040 Speaker 6: put the debt ceiling situation on ice forever because now 365 00:18:04,080 --> 00:18:07,240 Speaker 6: you have a clean, clear judicial ruling. 366 00:18:07,400 --> 00:18:09,359 Speaker 3: So that's a clean that's a clean way to do it. 367 00:18:09,560 --> 00:18:11,320 Speaker 3: There are other there are there's no sound to clean. 368 00:18:11,400 --> 00:18:12,520 Speaker 3: Let's just say, well, well, look, I. 369 00:18:12,520 --> 00:18:14,400 Speaker 6: Mean, I mean, I mean to come in here and 370 00:18:14,400 --> 00:18:16,840 Speaker 6: and and have the Supreme Court, which is coequal to 371 00:18:16,880 --> 00:18:19,760 Speaker 6: the other two branches of government, and effectively say no, 372 00:18:19,920 --> 00:18:20,679 Speaker 6: this is our perview. 373 00:18:20,760 --> 00:18:23,240 Speaker 3: No outcome would be clean. Show the process not so well. 374 00:18:23,320 --> 00:18:25,240 Speaker 6: It can happen the course of forty eight hours. You 375 00:18:25,280 --> 00:18:27,960 Speaker 6: don't really need, you know, a lengthy hearings on the 376 00:18:27,960 --> 00:18:30,120 Speaker 6: part of the Supreme Court. They have the Constitution right there. 377 00:18:30,160 --> 00:18:33,240 Speaker 6: They can read what's Amendment fourteen. Section four says. It's 378 00:18:33,320 --> 00:18:35,640 Speaker 6: very clear to me. You should read it yourself. I mean, 379 00:18:35,840 --> 00:18:39,360 Speaker 6: it's it's it's undeniable that this is not something that's 380 00:18:39,400 --> 00:18:42,560 Speaker 6: constitutional to let the to let to let intentionally let 381 00:18:42,840 --> 00:18:47,040 Speaker 6: certainly intentionally let the payments go unpaid. There's another way 382 00:18:47,080 --> 00:18:48,960 Speaker 6: to do this. Of course, the Treasury has you know, 383 00:18:49,119 --> 00:18:53,159 Speaker 6: hundreds of billions of gold in storage right at Fort Knox. 384 00:18:53,720 --> 00:18:55,200 Speaker 6: One way to do this is simply to issue gold 385 00:18:55,240 --> 00:18:57,479 Speaker 6: certificates to the Federal Reserve and have the Federal Reserve 386 00:18:57,560 --> 00:19:04,160 Speaker 6: continue to fund uh the the the government's operations through 387 00:19:04,160 --> 00:19:04,639 Speaker 6: this period. 388 00:19:04,960 --> 00:19:05,679 Speaker 1: That's a solution. 389 00:19:06,119 --> 00:19:08,920 Speaker 6: Look, there are a few workarounds. People have proposed these. 390 00:19:08,960 --> 00:19:10,439 Speaker 6: You can go on the web and you can read them, 391 00:19:10,440 --> 00:19:12,119 Speaker 6: and they tap it to be cleaner than the messy 392 00:19:12,160 --> 00:19:14,320 Speaker 6: situation we might get ourselves into the next few weeks. 393 00:19:14,400 --> 00:19:17,120 Speaker 2: This is a dissertation, folks, and the history of debt 394 00:19:17,160 --> 00:19:19,719 Speaker 2: coming out of World War two. Terry, how much of 395 00:19:19,720 --> 00:19:23,560 Speaker 2: this is almost religious in nature. We have a culture 396 00:19:23,600 --> 00:19:26,800 Speaker 2: in this America. I'm going to generalize it's Calvinists, but 397 00:19:26,840 --> 00:19:28,880 Speaker 2: that's unfair to the gentleman from Switzerland. 398 00:19:29,560 --> 00:19:31,440 Speaker 1: Debt is bad and. 399 00:19:31,480 --> 00:19:34,440 Speaker 2: Heil Broner and Bernstein wrote a classic monograph on his 400 00:19:34,520 --> 00:19:35,360 Speaker 2: thirty years. 401 00:19:35,119 --> 00:19:38,600 Speaker 1: Ago, debt is bad. We've got to get rid of debt, 402 00:19:38,720 --> 00:19:40,400 Speaker 1: and then we don't do we right? 403 00:19:40,480 --> 00:19:44,000 Speaker 2: I mean to me, there's a whole cultural overlayer that's unspoken. 404 00:19:44,160 --> 00:19:48,119 Speaker 6: Yeah, Debt in support of investment, debt in support of 405 00:19:49,480 --> 00:19:52,359 Speaker 6: assets being created in the economy. Debt in support of 406 00:19:52,400 --> 00:19:56,000 Speaker 6: more productivity by way of that is good. Debt in 407 00:19:56,040 --> 00:19:59,919 Speaker 6: support of more spending without a common amount of SA 408 00:20:00,000 --> 00:20:03,080 Speaker 6: savings on the other side is bad, especially when that 409 00:20:03,119 --> 00:20:06,560 Speaker 6: debt rises to a point where the income that's generated 410 00:20:06,560 --> 00:20:09,920 Speaker 6: by the spender is no longer sufficient to honor that debt, 411 00:20:09,960 --> 00:20:14,399 Speaker 6: to support that debt, to support the obligations of that 412 00:20:14,440 --> 00:20:16,880 Speaker 6: debt implied by that debt. So I think I think 413 00:20:17,200 --> 00:20:20,080 Speaker 6: debt is perfectly fine. It's an aspect of the capitalist 414 00:20:20,080 --> 00:20:24,080 Speaker 6: economy with limits, right. It depends where it's where it's going, 415 00:20:24,280 --> 00:20:26,560 Speaker 6: it's what activity is it's supporting effectively. 416 00:20:26,720 --> 00:20:29,720 Speaker 3: So let's get to the market question. Is there any risk? 417 00:20:29,880 --> 00:20:32,720 Speaker 3: What is the risk outside of the so called at 418 00:20:32,800 --> 00:20:36,440 Speaker 3: risk securities in the tebo market? What is that risk? 419 00:20:36,480 --> 00:20:37,199 Speaker 3: What does that look like? 420 00:20:37,320 --> 00:20:39,480 Speaker 6: Well, look, a lot of people say that if there's 421 00:20:39,480 --> 00:20:43,480 Speaker 6: a miss payment on a principle principal payment or missed 422 00:20:43,480 --> 00:20:48,479 Speaker 6: coupon payment, that Moodies will put the US in the fault, 423 00:20:48,920 --> 00:20:50,399 Speaker 6: or S and P will put the US in the 424 00:20:50,400 --> 00:20:55,720 Speaker 6: fault and then that will trigger CDs payments on the swaps. 425 00:20:56,240 --> 00:20:59,560 Speaker 6: I think that is not realistic, and I say that 426 00:20:59,600 --> 00:21:02,240 Speaker 6: with the fact that unlike a corporate bond or a 427 00:21:02,240 --> 00:21:06,520 Speaker 6: corporate obligation, US treasuries don't have cross default provisions. If 428 00:21:06,560 --> 00:21:08,199 Speaker 6: I do not, If I, as the US Treasury, do 429 00:21:08,280 --> 00:21:10,800 Speaker 6: not make a payment on a single bond, it does 430 00:21:10,840 --> 00:21:14,159 Speaker 6: not accelerate the payments on every other obligation that the 431 00:21:14,240 --> 00:21:16,800 Speaker 6: US Treasury has. Yes, you can say, maybe that bond 432 00:21:16,880 --> 00:21:20,240 Speaker 6: has defaulted, but the corpus of debt has not defaulted. 433 00:21:20,240 --> 00:21:23,879 Speaker 6: There's no, there's no there are no cross cross default provisions. 434 00:21:24,119 --> 00:21:26,080 Speaker 6: And that's tricky because you have to think of a 435 00:21:26,160 --> 00:21:28,959 Speaker 6: default as something different, and movies would have to think 436 00:21:28,960 --> 00:21:30,520 Speaker 6: about it as something different than they would if the 437 00:21:30,560 --> 00:21:34,639 Speaker 6: similar thing happened for a corporate issuer. And that's tricky. 438 00:21:34,680 --> 00:21:37,320 Speaker 6: That calls for a judgment call at that point. And 439 00:21:37,359 --> 00:21:39,040 Speaker 6: it's not too clear to me that even if a 440 00:21:39,080 --> 00:21:41,600 Speaker 6: payment is skipped that movies will go that far. Because 441 00:21:41,600 --> 00:21:43,760 Speaker 6: it has that out, they can avoid calling the fault. 442 00:21:44,000 --> 00:21:46,000 Speaker 6: We could avoid going to triggering the CBS. 443 00:21:46,040 --> 00:21:49,080 Speaker 3: What would that mean for things like collateral Treasuries used 444 00:21:49,080 --> 00:21:51,439 Speaker 3: as collateral for all types of things. What would that mean? 445 00:21:51,520 --> 00:21:53,720 Speaker 6: Well, look, the collateral, the value of the collateral is 446 00:21:53,760 --> 00:21:55,320 Speaker 6: only as good as the price of the collateral. So 447 00:21:55,320 --> 00:21:57,240 Speaker 6: to the extent that we're talking about a few pips 448 00:21:57,840 --> 00:22:01,000 Speaker 6: change in the price of those treasuries, Yeah, you'll demand 449 00:22:01,840 --> 00:22:06,040 Speaker 6: more of them to support whatever repoactivity or lending activity 450 00:22:06,040 --> 00:22:09,760 Speaker 6: you're trying to sponsor. But in the final analysis, as 451 00:22:09,800 --> 00:22:13,040 Speaker 6: long as the treasury bill has value in dollars, it'll 452 00:22:13,080 --> 00:22:14,280 Speaker 6: serve as good collateral. 453 00:22:14,760 --> 00:22:19,240 Speaker 2: Right thirty seconds Martin's Place, Sidney, Australia, Macquarie Group. Do 454 00:22:19,240 --> 00:22:21,399 Speaker 2: you still believe in the Pacific rim expansion? 455 00:22:22,119 --> 00:22:22,320 Speaker 1: Oh? 456 00:22:22,359 --> 00:22:26,440 Speaker 6: I don't necessarily believe in the China expansion long term 457 00:22:26,480 --> 00:22:29,240 Speaker 6: and structurally, I mean yes, China's undergoing a nice recovery 458 00:22:29,280 --> 00:22:33,960 Speaker 6: these days. It's hindered somewhat by the slowdown in demand 459 00:22:33,960 --> 00:22:36,399 Speaker 6: coming out of Europe in the US, but domestic demand 460 00:22:36,400 --> 00:22:38,480 Speaker 6: in China is good and that's enough to keep China's 461 00:22:38,520 --> 00:22:40,400 Speaker 6: engine moving forward for another year. 462 00:22:40,920 --> 00:22:41,480 Speaker 3: Beyond that. 463 00:22:42,000 --> 00:22:45,080 Speaker 6: Structurally speaking, you know, you have a demographic problem in China, 464 00:22:45,200 --> 00:22:48,600 Speaker 6: you have the demise of globalization. These are the things 465 00:22:48,600 --> 00:22:50,960 Speaker 6: that are going to slow the Asia Pacific story beyond 466 00:22:51,000 --> 00:22:51,360 Speaker 6: this year. 467 00:22:51,400 --> 00:22:54,199 Speaker 3: Wait, py Am, I early this week surprised to see it. 468 00:22:54,440 --> 00:23:01,200 Speaker 3: Try Wiseman, thank you. Now, I'm really placed to say 469 00:23:01,520 --> 00:23:04,160 Speaker 3: it's Mike Crack, the team principle for the Ashton Martin 470 00:23:04,400 --> 00:23:06,240 Speaker 3: F one team. Might wonderful to have you with a 471 00:23:06,280 --> 00:23:09,680 Speaker 3: Sam Blombag TV and Bloomberg Radio. I have to say, Mike, 472 00:23:09,720 --> 00:23:12,520 Speaker 3: this wasn't what I was expecting last year when I 473 00:23:12,520 --> 00:23:15,240 Speaker 3: heard the news that Sebastian Vader was leaving and Fernando 474 00:23:15,280 --> 00:23:17,800 Speaker 3: Alonzo was stepping in. To see you second in the 475 00:23:17,800 --> 00:23:21,280 Speaker 3: Constructors Championship is quite something, Mike. What's let that turn 476 00:23:21,320 --> 00:23:23,440 Speaker 3: around for you and the team? 477 00:23:23,720 --> 00:23:26,160 Speaker 7: Well, to be honest with you, I didn't expect that either, 478 00:23:26,720 --> 00:23:30,679 Speaker 7: to make such a big step. But we tried to 479 00:23:30,760 --> 00:23:32,960 Speaker 7: develop our car as much as we could last year, 480 00:23:33,400 --> 00:23:37,000 Speaker 7: and during the year we made subs central progress, but 481 00:23:37,080 --> 00:23:39,399 Speaker 7: it was never enough to pick the big points and 482 00:23:39,560 --> 00:23:43,760 Speaker 7: move forward in the championship. So yeah, by the end 483 00:23:43,760 --> 00:23:45,360 Speaker 7: of the year, the car was in a much much 484 00:23:45,359 --> 00:23:47,679 Speaker 7: better place and we were much more competitive and we 485 00:23:47,720 --> 00:23:51,480 Speaker 7: took another step over the window. And because everything is 486 00:23:51,560 --> 00:23:54,120 Speaker 7: related in this sport, it could also be that some 487 00:23:54,160 --> 00:23:57,560 Speaker 7: other competitors have not made the step that they wanted 488 00:23:57,640 --> 00:23:59,880 Speaker 7: and it brought us to the place we are in now, 489 00:24:00,040 --> 00:24:02,280 Speaker 7: and yeah, we are quite happy to be there. 490 00:24:02,880 --> 00:24:04,600 Speaker 3: Might well, get to the business of all of this 491 00:24:04,720 --> 00:24:06,560 Speaker 3: in just the moment. Can you tell me how important 492 00:24:06,560 --> 00:24:09,320 Speaker 3: it's been to bring Dan Fallows, the technical director on 493 00:24:09,359 --> 00:24:11,040 Speaker 3: board to as the modern F one. 494 00:24:11,920 --> 00:24:15,520 Speaker 7: Yeah, that is one of many recruits that we had 495 00:24:15,600 --> 00:24:19,240 Speaker 7: lately all across last year, and they have been very, 496 00:24:19,440 --> 00:24:23,399 Speaker 7: very complimentary to great workforce that we were already having. 497 00:24:23,560 --> 00:24:27,440 Speaker 7: So all in all, I think they came together as 498 00:24:27,440 --> 00:24:31,520 Speaker 7: a great group, get all the strength out of everybody, 499 00:24:31,840 --> 00:24:33,400 Speaker 7: and you see the resultant track. 500 00:24:33,480 --> 00:24:38,840 Speaker 2: Finally, I look, Mike at the extraordinary original that each 501 00:24:38,960 --> 00:24:42,520 Speaker 2: race is different in American baseball. We compare Fenway to 502 00:24:42,600 --> 00:24:47,440 Speaker 2: schavaz Ravine and other baseball parks. The distance from Baku 503 00:24:47,640 --> 00:24:51,760 Speaker 2: to Miami in terms of the actual track is just 504 00:24:51,880 --> 00:24:55,520 Speaker 2: extraordinary to me. How much is the adjustment for you 505 00:24:56,040 --> 00:25:00,720 Speaker 2: in what ten days to go from Azerbaijan to Florida. 506 00:25:00,760 --> 00:25:03,879 Speaker 7: Well, it is. First of all, it's a huge logistics 507 00:25:03,880 --> 00:25:07,240 Speaker 7: efforts to bring the whole, the whole circus over to 508 00:25:07,320 --> 00:25:11,679 Speaker 7: the US. But in that short time then you have 509 00:25:11,760 --> 00:25:15,679 Speaker 7: to adjust basically everything, not only the clocks, but you 510 00:25:15,800 --> 00:25:19,400 Speaker 7: have to bring the cars adopt cast to the layout 511 00:25:19,520 --> 00:25:22,920 Speaker 7: of the Miami circuit because it's substantially different, and then 512 00:25:22,960 --> 00:25:24,879 Speaker 7: we need to get used to the temperatures, to the 513 00:25:24,920 --> 00:25:28,280 Speaker 7: heat and all the things that are different. So it's 514 00:25:28,359 --> 00:25:30,560 Speaker 7: quite a substantial exercise for everybody. 515 00:25:30,240 --> 00:25:30,399 Speaker 5: You know. 516 00:25:30,440 --> 00:25:32,680 Speaker 2: I look at Red Bull as a leading team now, 517 00:25:32,720 --> 00:25:35,320 Speaker 2: and the two drivers really go and add it second 518 00:25:35,359 --> 00:25:38,080 Speaker 2: by second, tenth of a second by tenth of a second. 519 00:25:38,720 --> 00:25:43,120 Speaker 2: And the relationship of your two drivers is absolutely extraordinary. 520 00:25:43,200 --> 00:25:46,479 Speaker 2: The veteranal Alonzo with Stroll, and granted I get the 521 00:25:46,480 --> 00:25:49,200 Speaker 2: idea that Dad's helping out as well, but Stroll seems 522 00:25:49,240 --> 00:25:52,760 Speaker 2: like he's really earned the stripes. Explain the relationship of 523 00:25:52,800 --> 00:25:55,560 Speaker 2: your two drivers is they go into Miami. 524 00:25:56,760 --> 00:25:59,480 Speaker 7: Well, they are, first of all, they are great drivers, 525 00:25:59,480 --> 00:26:01,600 Speaker 7: but they're not They are great human being, is very 526 00:26:01,640 --> 00:26:05,040 Speaker 7: mach sure, and great teammates, and they they help us 527 00:26:05,560 --> 00:26:08,800 Speaker 7: a big, big time to work as a team much 528 00:26:08,880 --> 00:26:12,119 Speaker 7: much more than other teams too very often, and you 529 00:26:12,160 --> 00:26:15,240 Speaker 7: see with other teams there is a fierce rivalry between 530 00:26:15,280 --> 00:26:21,159 Speaker 7: teams and teammates, which at times is even ending in accidents. 531 00:26:21,160 --> 00:26:23,960 Speaker 7: At the circuit. Between these two cars, I think we 532 00:26:23,960 --> 00:26:27,840 Speaker 7: are fortunate to have two such great drivers that have 533 00:26:27,960 --> 00:26:32,240 Speaker 7: understood that this is a team sport and that the 534 00:26:32,359 --> 00:26:36,040 Speaker 7: rivals are out there with the different colored cars than ours, 535 00:26:36,280 --> 00:26:40,320 Speaker 7: and we need to gether at every possible opportunity to 536 00:26:39,680 --> 00:26:41,600 Speaker 7: to do better than the others. 537 00:26:41,960 --> 00:26:43,800 Speaker 3: Mike, have to be honest with you, and this is 538 00:26:43,840 --> 00:26:49,280 Speaker 3: my perspective. The Miami racetrack looks absolutely terrible, and I've 539 00:26:49,280 --> 00:26:50,879 Speaker 3: got to say, and maybe you've got to be more 540 00:26:50,880 --> 00:26:53,000 Speaker 3: diplomatic because of the position you're in. I think it's 541 00:26:53,000 --> 00:26:56,359 Speaker 3: a worry for long term fans of this sport that 542 00:26:56,520 --> 00:26:59,840 Speaker 3: the emphasis on breaking the United States of America and 543 00:27:00,080 --> 00:27:03,640 Speaker 3: wanting to sacrifice the quality of the racing to do so. Mike, 544 00:27:03,680 --> 00:27:04,840 Speaker 3: do you share those concerns? 545 00:27:06,440 --> 00:27:09,440 Speaker 7: No, I do not share these concerns because I think 546 00:27:10,160 --> 00:27:13,280 Speaker 7: the racetrack in Miami has everything that is that every 547 00:27:13,560 --> 00:27:16,679 Speaker 7: that the normal modern Formula one race teck has to have. 548 00:27:16,800 --> 00:27:19,640 Speaker 7: It has straight with the rs zons, it has high 549 00:27:19,680 --> 00:27:22,439 Speaker 7: speed corners, it has some low speed corners, it has 550 00:27:22,480 --> 00:27:26,199 Speaker 7: been completely resurfaced, and I think the heat that we 551 00:27:26,280 --> 00:27:31,240 Speaker 7: will have over the weekend will add a lot of 552 00:27:31,280 --> 00:27:34,160 Speaker 7: difficulty to cool the cars, but mainly to also keep 553 00:27:34,160 --> 00:27:37,399 Speaker 7: the tire management under control. So all in all, I 554 00:27:37,400 --> 00:27:40,040 Speaker 7: think we are for a great weekend and great racing. 555 00:27:40,200 --> 00:27:42,520 Speaker 3: Well, clearly the future is bright for the spot. The 556 00:27:42,560 --> 00:27:44,920 Speaker 3: attention has got off the back of the Netflix series 557 00:27:44,960 --> 00:27:47,920 Speaker 3: has just been absolutely phenomenal. To get my partner in crime, 558 00:27:48,000 --> 00:27:49,600 Speaker 3: Tom Keane on board to folks and I for one 559 00:27:49,640 --> 00:27:51,320 Speaker 3: has been a pleasure for me over the last twelve 560 00:27:51,400 --> 00:27:53,880 Speaker 3: months or so. Mike, I want to talk about things 561 00:27:53,920 --> 00:27:57,200 Speaker 3: further down the road. There's always been a relationship between 562 00:27:57,240 --> 00:27:59,680 Speaker 3: the F one team and the road car. Ferrari is 563 00:27:59,680 --> 00:28:02,160 Speaker 3: a great example of that over the years, more recently 564 00:28:02,160 --> 00:28:05,199 Speaker 3: as the martl again talking about the same thing, I 565 00:28:05,200 --> 00:28:08,119 Speaker 3: want to understand the tension ten years out when as 566 00:28:08,200 --> 00:28:10,840 Speaker 3: the Martin and the road car is fully electrified by 567 00:28:10,960 --> 00:28:13,560 Speaker 3: twenty thirty s, where does that leave as the Mard 568 00:28:13,600 --> 00:28:16,040 Speaker 3: and F one and the relationship between the F one 569 00:28:16,119 --> 00:28:18,120 Speaker 3: team and what goes into the road car. 570 00:28:19,600 --> 00:28:23,640 Speaker 7: Well, that is a very good question, and the same 571 00:28:23,720 --> 00:28:26,600 Speaker 7: applies also to all the other brands. The one that 572 00:28:26,640 --> 00:28:30,240 Speaker 7: you were just mentioning. I think F one is currently 573 00:28:30,440 --> 00:28:34,640 Speaker 7: working heavily into carbon net zero, into going more sustainable 574 00:28:34,800 --> 00:28:38,040 Speaker 7: by twenty thirty, which is much less than in ten 575 00:28:38,120 --> 00:28:41,440 Speaker 7: years time. So by twenty twenty six we will run 576 00:28:41,480 --> 00:28:45,520 Speaker 7: only on sustainable fuel. We will substantially increase the amount 577 00:28:45,560 --> 00:28:48,920 Speaker 7: of electric power that we will deliver to the car. 578 00:28:49,640 --> 00:28:53,560 Speaker 7: It will be around fifty to fifty. So the from 579 00:28:53,600 --> 00:28:56,400 Speaker 7: Lomer cars are already hybrids, but the electric part will 580 00:28:56,400 --> 00:29:00,320 Speaker 7: will increase and it will complement the road car fleet 581 00:29:00,720 --> 00:29:02,800 Speaker 7: by these developments. 582 00:29:03,400 --> 00:29:05,320 Speaker 3: How will that take place if you're going to retain 583 00:29:05,400 --> 00:29:08,120 Speaker 3: to some degree the internal combustion engine and the road 584 00:29:08,160 --> 00:29:08,680 Speaker 3: can won't. 585 00:29:09,960 --> 00:29:10,160 Speaker 1: Well. 586 00:29:10,240 --> 00:29:18,920 Speaker 7: I think lately the developments in artificial orses or how 587 00:29:19,000 --> 00:29:24,080 Speaker 7: you call them, sustainable fuels is adding or is massively 588 00:29:24,160 --> 00:29:27,040 Speaker 7: increasing life of the combustion engine, and it has been 589 00:29:27,040 --> 00:29:30,280 Speaker 7: also classified like that. So from that point of view, 590 00:29:30,360 --> 00:29:34,520 Speaker 7: I think Form one can be a great participant or 591 00:29:34,640 --> 00:29:40,280 Speaker 7: great catalysts to the road cup business to make these 592 00:29:41,120 --> 00:29:44,480 Speaker 7: nice cars that we have today sustainable and be able 593 00:29:44,520 --> 00:29:45,440 Speaker 7: to run them for longer. 594 00:29:45,480 --> 00:29:47,640 Speaker 3: I sense from what you're saying, Mike, that you don't 595 00:29:47,640 --> 00:29:51,760 Speaker 3: think everyone ever becomes fully electrified, and actually to some 596 00:29:51,840 --> 00:29:53,680 Speaker 3: degree you can go some way to preserve in the 597 00:29:53,680 --> 00:29:55,720 Speaker 3: internal combustion engine on the road. Is that right? 598 00:29:56,480 --> 00:29:59,560 Speaker 7: Well, that's a good question. I think the combustion engine 599 00:29:59,560 --> 00:30:02,760 Speaker 7: will you have is time for the next ten years 600 00:30:02,800 --> 00:30:06,880 Speaker 7: for sure, but ultimately it will fade out and for one, 601 00:30:07,000 --> 00:30:11,880 Speaker 7: will not be with the combustion engine in say, twenty 602 00:30:11,960 --> 00:30:13,080 Speaker 7: years from now. I will doubt that. 603 00:30:13,640 --> 00:30:16,480 Speaker 2: Mike oh reporters in London, they're like, okay, enough talk 604 00:30:16,520 --> 00:30:18,760 Speaker 2: about Taylor, Swift and the rest of it. What's the 605 00:30:18,800 --> 00:30:22,720 Speaker 2: relationship with Honda going to be out to twenty twenty six? 606 00:30:22,760 --> 00:30:25,400 Speaker 2: So we're going to see some drama is Honda tries 607 00:30:25,440 --> 00:30:30,080 Speaker 2: to climb into Formula f one. 608 00:30:30,480 --> 00:30:33,840 Speaker 7: We are quite happy with the powertrain power unit manufacturer 609 00:30:33,840 --> 00:30:37,320 Speaker 7: that we have at the moment. We have a lot 610 00:30:37,320 --> 00:30:40,200 Speaker 7: of on our plate at the moment for twenty twenty three, 611 00:30:40,280 --> 00:30:44,400 Speaker 7: twenty twenty four to make further progress, and we are 612 00:30:44,440 --> 00:30:48,240 Speaker 7: not really too much into twenty twenty six at this stage. 613 00:30:48,280 --> 00:30:50,920 Speaker 3: Just for the pit passes for Miami seven thirty one 614 00:30:51,320 --> 00:30:54,720 Speaker 3: Lexington Avenue, we got the code. I've got the zip code. 615 00:30:54,440 --> 00:30:56,400 Speaker 1: For Mike one zero zero two to two. 616 00:30:56,560 --> 00:30:59,040 Speaker 3: Okay, I'll buy tell Alonzo. 617 00:30:58,560 --> 00:31:00,960 Speaker 2: I'll buy the Globe Trotter lug if you can get 618 00:31:01,040 --> 00:31:02,280 Speaker 2: us into the pits. 619 00:31:02,560 --> 00:31:04,240 Speaker 3: My thanks for this, I appreciate it. 620 00:31:04,320 --> 00:31:05,800 Speaker 1: Mate. We could be there with Taylor. 621 00:31:06,040 --> 00:31:07,840 Speaker 3: Good luck for the weekend. We're not going to Oscar 622 00:31:07,840 --> 00:31:11,840 Speaker 3: that time. Thank you. 623 00:31:22,640 --> 00:31:24,840 Speaker 2: And there are the trees now with this Economic Policy 624 00:31:24,880 --> 00:31:28,640 Speaker 2: Research Director Veda partners with great experience on the marble 625 00:31:28,680 --> 00:31:33,040 Speaker 2: halls of Capitol Hill. When there is a debt crisis, 626 00:31:33,360 --> 00:31:36,720 Speaker 2: when there is some form of shutdown or jaw boning, 627 00:31:37,480 --> 00:31:41,400 Speaker 2: how does the budget process change on Capitol Hill. 628 00:31:43,040 --> 00:31:46,520 Speaker 8: I think, if anything, it speeds up, it speeds up dramatically. 629 00:31:47,160 --> 00:31:49,880 Speaker 8: There was a lot of hay made about Secretary Yellen 630 00:31:49,960 --> 00:31:52,680 Speaker 8: moving the date for the debt ceiling up from June 631 00:31:52,720 --> 00:31:55,480 Speaker 8: fifth to as early as June first yesterday, but the 632 00:31:55,680 --> 00:31:59,040 Speaker 8: reality is that nobody does anything until the last minute. Anyway, 633 00:31:59,480 --> 00:32:02,280 Speaker 8: we got about four weeks to get this resolved. 634 00:32:02,640 --> 00:32:03,480 Speaker 2: If those four. 635 00:32:03,320 --> 00:32:05,880 Speaker 8: Weeks are in May or June or July or even September, 636 00:32:06,080 --> 00:32:08,240 Speaker 8: it's not like they're going to start working in advance. 637 00:32:08,600 --> 00:32:11,440 Speaker 8: I think Speaker McCarthy demonstrated a lot of good will 638 00:32:11,440 --> 00:32:13,960 Speaker 8: by putting that vote on the floor last week, getting 639 00:32:13,960 --> 00:32:16,880 Speaker 8: things moving well ahead of schedule, even before Secretary Yellen 640 00:32:16,880 --> 00:32:20,160 Speaker 8: provided the update post tax receipts. So basically it just 641 00:32:20,280 --> 00:32:22,880 Speaker 8: burst them into action. We've got four weeks to get 642 00:32:22,880 --> 00:32:24,960 Speaker 8: this result. That's plenty of time. We've seen it done 643 00:32:24,960 --> 00:32:27,320 Speaker 8: in far less and in fact, I would wager that 644 00:32:27,360 --> 00:32:29,680 Speaker 8: it won't even start to come to an end until 645 00:32:29,840 --> 00:32:31,160 Speaker 8: we get a twenty second. 646 00:32:31,040 --> 00:32:34,880 Speaker 2: So based on that answer, five guys sitting on a 647 00:32:34,920 --> 00:32:38,200 Speaker 2: couch with Cherry Yellen in the Oval Office on May 648 00:32:38,320 --> 00:32:40,560 Speaker 2: ninth doesn't have an urgency to it. 649 00:32:40,640 --> 00:32:41,360 Speaker 1: Is that what I hear? 650 00:32:43,240 --> 00:32:44,960 Speaker 8: I'm happy for the Big four to get in a room. 651 00:32:45,000 --> 00:32:46,840 Speaker 8: I think that's very important. That is one of the 652 00:32:46,880 --> 00:32:49,600 Speaker 8: steps in the process. But we have a number of 653 00:32:49,640 --> 00:32:52,680 Speaker 8: other formalities that also need to be accomplished. Senator Schumer, 654 00:32:52,760 --> 00:32:55,080 Speaker 8: the majority leader, has scheduled two votes in the Senate 655 00:32:55,200 --> 00:32:57,560 Speaker 8: or queued them up, at least one on a clean 656 00:32:57,600 --> 00:32:59,800 Speaker 8: debt ceiling hike with all the Democrats will vote four 657 00:32:59,840 --> 00:33:02,080 Speaker 8: and one on the House pass built, which some of 658 00:33:02,120 --> 00:33:04,800 Speaker 8: the Republicans might vote force. And we're still at least 659 00:33:04,800 --> 00:33:08,040 Speaker 8: a week away from any concrete negotiations. I want to 660 00:33:08,080 --> 00:33:10,239 Speaker 8: see some of the Budget committee chairs get called up. 661 00:33:10,320 --> 00:33:12,120 Speaker 8: I imagine that there will be more than just this 662 00:33:12,160 --> 00:33:15,360 Speaker 8: one group of Big four that gets called up to 663 00:33:15,400 --> 00:33:17,760 Speaker 8: the White House. And then, of course we really want 664 00:33:17,800 --> 00:33:19,640 Speaker 8: to see staff in the room. You guys know this 665 00:33:19,720 --> 00:33:21,560 Speaker 8: about me, and so to all of our clients. I 666 00:33:21,600 --> 00:33:23,800 Speaker 8: really care what staff has to say more than anything else. 667 00:33:24,120 --> 00:33:25,960 Speaker 8: So I want to see those guys get together, and 668 00:33:25,960 --> 00:33:28,840 Speaker 8: I would imagine that starts soon and they're able to 669 00:33:28,840 --> 00:33:30,440 Speaker 8: come together a deal within the next three weeks. 670 00:33:30,440 --> 00:33:32,680 Speaker 3: And let's taste that out a little bit more, Henrietta, 671 00:33:32,720 --> 00:33:34,479 Speaker 3: I don't have a read on this. I've got no 672 00:33:34,560 --> 00:33:37,360 Speaker 3: idea which way it goes. I'm told by some people 673 00:33:37,720 --> 00:33:40,360 Speaker 3: to same movie, same ending, won't be any different this 674 00:33:40,400 --> 00:33:42,960 Speaker 3: time around. I'm told by other people it is different 675 00:33:43,000 --> 00:33:46,400 Speaker 3: this time, Henrietta, what informs your read on that you mentioned? 676 00:33:46,440 --> 00:33:49,560 Speaker 3: Staff wok me through it right? 677 00:33:49,680 --> 00:33:51,720 Speaker 8: Well, not only have we seen this movie so many 678 00:33:51,760 --> 00:33:55,080 Speaker 8: times before, but it's almost an exact repeat of twenty eleven. 679 00:33:55,480 --> 00:33:58,000 Speaker 8: You can even find similar votes from twenty fourteen. In 680 00:33:58,080 --> 00:34:00,920 Speaker 8: twenty seventeen, we have the exact v act same dynamic 681 00:34:00,960 --> 00:34:03,680 Speaker 8: where the president is a Democrat, the Senate is controlled 682 00:34:03,680 --> 00:34:06,320 Speaker 8: by Democrats, and the House is controlled by Republicans. What 683 00:34:06,480 --> 00:34:08,759 Speaker 8: ends up happening is you see a bill passing the 684 00:34:08,800 --> 00:34:12,120 Speaker 8: House that's written mostly with the intention of just getting 685 00:34:12,320 --> 00:34:15,759 Speaker 8: my majority party in one chamber signed on. That's what 686 00:34:15,800 --> 00:34:17,960 Speaker 8: they did last week, and now we're going to start 687 00:34:18,000 --> 00:34:20,520 Speaker 8: moving into the place where staff goes through the fine 688 00:34:20,560 --> 00:34:24,240 Speaker 8: print and finds three hundred to five hundred billion dollars 689 00:34:24,280 --> 00:34:27,279 Speaker 8: in deficit reduction, which is the level that Staff advises me. 690 00:34:27,320 --> 00:34:29,719 Speaker 8: On the Democratic side they're willing to swallow in order 691 00:34:29,760 --> 00:34:32,160 Speaker 8: to hike the debt ceiling to thirty three trillion, which 692 00:34:32,200 --> 00:34:34,759 Speaker 8: would get us roughly through call it March of twenty 693 00:34:34,800 --> 00:34:37,840 Speaker 8: twenty five, after the presidential election cycle. Those are the 694 00:34:37,880 --> 00:34:41,120 Speaker 8: kind of minuship points that Staff is focused on. And 695 00:34:41,239 --> 00:34:43,600 Speaker 8: if you see, those cuts come from things like clawing 696 00:34:43,640 --> 00:34:48,359 Speaker 8: back COVID relief, reducing service on the debt, fraud, waste 697 00:34:48,360 --> 00:34:51,759 Speaker 8: and abuse spending, all things that were incorporated as a 698 00:34:51,800 --> 00:34:55,400 Speaker 8: part of the Republican past bill, but not nearly the 699 00:34:55,480 --> 00:34:58,600 Speaker 8: three trillion plus number that Speaker mccarthney put on the floor. 700 00:34:58,640 --> 00:35:00,359 Speaker 8: That's a non starter. We need to get that down 701 00:35:00,400 --> 00:35:03,160 Speaker 8: to three hundred and five hundred billion and horse trade 702 00:35:03,160 --> 00:35:04,959 Speaker 8: back and forth, and that's what Staff will do behind 703 00:35:04,960 --> 00:35:05,320 Speaker 8: the scenes. 704 00:35:05,400 --> 00:35:07,360 Speaker 3: There's going to be a lot of inquisted on, a 705 00:35:07,360 --> 00:35:10,480 Speaker 3: lot of analysis between now and then. Henryta indulge me 706 00:35:10,520 --> 00:35:13,520 Speaker 3: in go through this scenario. This is something Terry Wiseman 707 00:35:13,960 --> 00:35:16,640 Speaker 3: of Macquarie mentioned in the last hour. He said this 708 00:35:16,680 --> 00:35:18,960 Speaker 3: and this is a quote from him. If we approach 709 00:35:18,960 --> 00:35:21,799 Speaker 3: a crisis, I think the cleanest solution here, if we 710 00:35:21,880 --> 00:35:24,120 Speaker 3: don't get to a political solution, is simply for the 711 00:35:24,200 --> 00:35:27,120 Speaker 3: US Treasury to continue to do to do what it's doing, 712 00:35:27,320 --> 00:35:30,360 Speaker 3: i e. Issue debt Henry. So he made the point 713 00:35:30,360 --> 00:35:34,200 Speaker 3: that they can just go on ignore the political situation 714 00:35:34,520 --> 00:35:36,640 Speaker 3: and carry on issue in debt and pay their bills. 715 00:35:36,960 --> 00:35:39,240 Speaker 3: Is that something you can see as a workable solution 716 00:35:39,320 --> 00:35:39,600 Speaker 3: to this? 717 00:35:41,239 --> 00:35:45,040 Speaker 8: No, no offense, but it's just not Congress is going 718 00:35:45,120 --> 00:35:47,759 Speaker 8: to insist on acting here. I know it looks like 719 00:35:47,800 --> 00:35:49,960 Speaker 8: they don't want to take a boat, but they react 720 00:35:50,040 --> 00:35:54,000 Speaker 8: very poorly when any federal agency or otherwise take some 721 00:35:54,080 --> 00:35:57,480 Speaker 8: of their authority away. That jurisdiction or control is something 722 00:35:57,520 --> 00:36:00,239 Speaker 8: that you see committees cover it, and certainly the House 723 00:36:00,280 --> 00:36:02,560 Speaker 8: and Senate look no further than the ways it means 724 00:36:02,560 --> 00:36:05,000 Speaker 8: for their tax policy bills getting blue slipped, you know, 725 00:36:05,200 --> 00:36:08,120 Speaker 8: insisting that they start in the House. They react very 726 00:36:08,160 --> 00:36:11,200 Speaker 8: poorly when any federal regulator oversteps their bounds and use 727 00:36:11,200 --> 00:36:14,080 Speaker 8: serves their authority. So I believe Congress will act. I 728 00:36:14,200 --> 00:36:16,400 Speaker 8: am not concerned about whether they will act. Default is 729 00:36:16,440 --> 00:36:18,960 Speaker 8: not an option I think investors should, you know, sort 730 00:36:18,960 --> 00:36:21,160 Speaker 8: of skip over the headlines and see that Kevin McCarthy 731 00:36:21,160 --> 00:36:23,520 Speaker 8: put that bill on the floor well before he needed to. 732 00:36:23,680 --> 00:36:26,640 Speaker 8: We've got four weeks to negotiate. I see no real 733 00:36:26,680 --> 00:36:27,279 Speaker 8: problem here. 734 00:36:27,360 --> 00:36:30,440 Speaker 3: Four weeks is enough as far as you'll consent more 735 00:36:30,480 --> 00:36:32,680 Speaker 3: than enough, I'm going to trice the fight upon us. 736 00:36:32,840 --> 00:36:36,680 Speaker 2: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify, and 737 00:36:36,800 --> 00:36:41,040 Speaker 2: anywhere else you get your podcasts. Listen live every weekday 738 00:36:41,280 --> 00:36:46,560 Speaker 2: starting at seven am Eastern Bloomberg dot Com, the iHeartRadio app. 739 00:36:46,560 --> 00:36:48,880 Speaker 1: Tune In, and the Bloomberg Business app. 740 00:36:49,320 --> 00:36:53,000 Speaker 2: You can watch us live on Bloomberg Television and always. 741 00:36:53,360 --> 00:36:57,280 Speaker 2: I'm the Bloomberg Terminal. Thanks for listening. I'm Tom Keane, 742 00:36:57,440 --> 00:36:59,200 Speaker 2: and this is Bloomberg