Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Jason Kelly. We're here every day bringing you the latest
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Speaker 1: listen to our radio show weekdays at two pm Eastern
Speaker 1: only on Bloomberg Radio. You're listening to a special edition
Speaker 1: of Bloomberg Business Week, live from the nation's capital. I'm
Speaker 1: Jason Kelly alongside David Rubenstein, co founder, co chairman of
Speaker 1: the Carlisle Group. So David, catching our breath here a
Speaker 1: little bit. Another record day on Wall Street. It's hard
Speaker 1: to believe it can keep going on. I've been amazed,
Speaker 1: and I think most people would not have predicted this
Speaker 1: one or two months ago. I think one or two
Speaker 1: months ago people thought this steam was coming out, and
Speaker 1: now the steam is kind of heating up. So I
Speaker 1: wish I could explain it, but I really cannot. So lutely. Well,
Speaker 1: if you can't explain it, I'm not sure who can.
Speaker 1: But we will turn to set the business week agenda
Speaker 1: with a guy who watches the markets every day, Dave Wilson,
Speaker 1: Stocks Editor, author of the chart and stock of the day.
Speaker 1: He's back in our Bloomberg Interactor Broker studio. So Dave,
Speaker 1: come on in here. What are you seeing underneath this trade?
Speaker 1: You've got all eleven of the main industry groups in
Speaker 1: the SNP five hundred higher, which really kind of jumps out.
Speaker 1: I mean, some of the more defensive areas of the
Speaker 1: market leading the way, you know, consumer staples, food, beverage, tobacco,
Speaker 1: healthcare utilities. But on the other side of the coin,
Speaker 1: you look at what's going on with the cruise line owners,
Speaker 1: and they're really leading the way here, especially Carnival up
Speaker 1: more than seven percent, biggest gay in the SNP five
Speaker 1: hundred UH. Their fiscal fourth quarter earnings beat analysts average,
Speaker 1: Essman and Bloomberg survey by the most in two years.
Speaker 1: Revenue came out ahead their outlook for the current fiscal
Speaker 1: year also positively. Put it all together, you've got Royal
Speaker 1: Caribbean and Norwegian cruise line up by about three and
Speaker 1: a half percent, also lifting the S and P five.
Speaker 1: And you want to talk about an economically sensitive kind
Speaker 1: of area, certainly you would think, you know, cruise line
Speaker 1: travel fits that bill. So you've kind of got it
Speaker 1: from both directions. In today's trading. You know, it's interesting, Uh,
Speaker 1: with the impeachment crisis going on or in preachment process
Speaker 1: going on, one might think, if you're an outsider, that
Speaker 1: there'd be uncertainty in the markets. People are not sure
Speaker 1: what's going on. What I think is really going on
Speaker 1: is the China deal is essentially done, the Mexican deal,
Speaker 1: County Canadian Mexican deal is essentially done. Interest rates are
Speaker 1: staying low, unemployment is very low, and I think many
Speaker 1: people feel that the impeachment process, however it unfolds, is
Speaker 1: not likely to lead to the president leaving office anytime soon.
Speaker 1: So people who are looking for certainty in the markets
Speaker 1: see that there's pretty gonna pretty a fair amount of
Speaker 1: certainty going forward. We know what the interest rates are
Speaker 1: likely to be, we know what the trade situations likely
Speaker 1: to be in the air term. Uh, we know with
Speaker 1: the unemployment situations like to be, and we don't see
Speaker 1: any real change in their presidential situation, and are you surprised,
Speaker 1: Dave Wilson at how little politics either has not played
Speaker 1: in or has been baked into. David's point, Well, it
Speaker 1: really goes to show you that new investors are focusing
Speaker 1: on things like the economy and earnings. You know, here
Speaker 1: we are, you know, ten years plus into an economic expansion.
Speaker 1: And though certainly you go back to say August and
Speaker 1: there was concerned that we we finally start to see
Speaker 1: a contraction, it hasn't materialized. And you know, you'll look
Speaker 1: out to next year and a whole lot of people
Speaker 1: are anticipating the growth will last. And then as far
Speaker 1: as earnings go, you'll look at the numbers we've compiled
Speaker 1: on S and P five companies from individual companies, and
Speaker 1: you see analysts anticipating that, yeah, we may be down
Speaker 1: this quarter, but you look at the first, second, third,
Speaker 1: and fourth quarters and next year you're seeing what you
Speaker 1: would call sequential improvement quartered a quarter. By the time
Speaker 1: you get to the fourth quarter, thirteen percent plus earnings growth.
Speaker 1: Now that's the view. Whether it plays out or not,
Speaker 1: it remains to be seen. Nonetheless, you can understand where
Speaker 1: the optimism on stocks comes from. Given the sustainability of
Speaker 1: the economic expansion and the prospects for earnings as are
Speaker 1: reflected in analysts estimates. Absolutely, and I think that the
Speaker 1: markets generally like to figure out what is going to
Speaker 1: happen the next couple of months or six months or so,
Speaker 1: and like like predictability. And right now over the next
Speaker 1: six months, they don't see a change in interest rates
Speaker 1: going up. They think President Trump will be in office
Speaker 1: for certain, they think there's not gonna be trade wars
Speaker 1: of any consequence. So I think investors are pretty good now.
Speaker 1: There's no doubt are some economists somewhere who are saying
Speaker 1: it's going to lead to a at some point we're
Speaker 1: gonna have a slowdown, and those memos will be pulled
Speaker 1: out of the files when we actually have a slowdown,
Speaker 1: But right now people are not actually surfacing those memos. Yeah. Absolutely,
Speaker 1: it does not seem to be the case at all.
Speaker 1: Dave Wilson, thank you so much. You'll be back with
Speaker 1: me later on with your chart and stock of the day.
Speaker 1: David Reuben signing, gonna be with me here for a
Speaker 1: couple of hours. And David, I have to ask you,
Speaker 1: you know, over at Carlisle, a huge portfolio of companies.
Speaker 1: You talk to CEOs all the time, you interview them,
Speaker 1: many of them one your show Peer to Peer Conversations
Speaker 1: here on Blueberg TV. How do they feel? I mean,
Speaker 1: because we have sent some caution from CEOs over the
Speaker 1: back half of this year. Well, CEOs don't want to
Speaker 1: look like they're too um a bulliant, and they always
Speaker 1: want to be prepared for a downturn. But right now
Speaker 1: they have a fair amount of cash, their stock prices
Speaker 1: are high. Um, they're feeling pretty good about things. They
Speaker 1: don't want to go out in the public and say,
Speaker 1: look how great things are and things can't go wrong,
Speaker 1: but they're feeling privately pretty good about things. There's always
Speaker 1: a cautionary word here or there, but generally they're feeling
Speaker 1: pretty good. And are they doing deals? I mean, that's
Speaker 1: always one of the questions around, you know, where we
Speaker 1: are in the cycle, in terms of do they feel
Speaker 1: comfortable doing a big acquisition or or sort of spending
Speaker 1: some of that money. I think the M and A
Speaker 1: market is okay, but that the slowdown there at center
Speaker 1: is a slowdown is simply that prices are very high,
Speaker 1: so there are no very there are very few bargains
Speaker 1: out there, and you don't see any value investors really
Speaker 1: saying there's a great cheap thing to buy. So prices
Speaker 1: are high and you have to swallow the idea that
Speaker 1: you're gonna be paying for good companies a much higher
Speaker 1: multiple than you normally would pay. And I know we're
Speaker 1: going to talk about private equity throughout the show, but
Speaker 1: does that make private equity deal making that much harder
Speaker 1: those valuations. Private equity deal making is doing okay this year.
Speaker 1: I would say it's about what it was last year.
Speaker 1: The principal issue is that you have to get comfortable
Speaker 1: with paying thirteen fourteen times cash flow or EBIT down multiples.
Speaker 1: And the way you can get comfortable with it is
Speaker 1: really that investors are willing to accept somewhat lower rates
Speaker 1: of return than they were five or ten years ago. Today,
Speaker 1: in the low interest rate environment, if you can get
Speaker 1: an investor thirteen fourteen, fifteen percent net intern and ray
Speaker 1: to return over five years, they're happy with that. In
Speaker 1: the old days, you might have won. So investors are
Speaker 1: willing to take lower rate return. You can still do
Speaker 1: these deals, but they're no doubt more expensive. Well feels amazing,
Speaker 1: and then world of negative interest rates and where you're
Speaker 1: just not seeing the sorts of yields that you might
Speaker 1: be used. That's true. Be course, those deals take three
Speaker 1: or four years to pull off, and there's some liquidity
Speaker 1: for the in the markets when you when you do
Speaker 1: those deals. But generally people are pretty uh a feeling
Speaker 1: they can get those kind of returns, and we have
Speaker 1: been able to do that, and a lot of enthusiasm
Speaker 1: still for alternatives. It feels like among institutional investors there's
Speaker 1: more enthusiasm. And then in the thirty years I've seen
Speaker 1: uh this market, and I think the reason is that
Speaker 1: people think there will be a turn down at some point.
Speaker 1: And what we learned in the last turn down, the
Speaker 1: Great Recession, is that private equity and alternatives tended to
Speaker 1: be a pretty good hedge Uh. Not not so much
Speaker 1: hedge funds, but uh private equity firms did pretty well
Speaker 1: through the Great Recession because they fix their companies, they
Speaker 1: put in more equity if necessary, or they bought some
Speaker 1: debt back at discount. And people think, if there's a
Speaker 1: downturn again, these same managers will figure out how to
Speaker 1: get through it all right, much much more to come
Speaker 1: with David Rubinstein here on a special edition of Bloomberg
Speaker 1: Business Week. I'm Jason Kelly in wash Ington, d C.
Speaker 1: We're gonna talk a little bit about this split screen
Speaker 1: week that we had in politics, talk a little bit
Speaker 1: about trade, and much more coming up. You are listening
Speaker 1: to Bloomberg Business Week. Jason Kelly and David rubinstide here
Speaker 1: in our studio and just crossing the Bloomberg terminal. President
Speaker 1: Trump accepting the February fourth State of the Union invitation
Speaker 1: from House Speaker Nan Nancy Pelosi, and who better to
Speaker 1: break down politics? We go straight to the boss. We
Speaker 1: come here to Washington. Craig Gordon, Executive editor and Washington
Speaker 1: Bureau Chief, joining David and myself in our studio. So
Speaker 1: we're gonna hear from the President in February four. Yeah,
Speaker 1: I mean the sort of the historical moments keep piling
Speaker 1: up here. I mean, if we understand the schedule for
Speaker 1: the impeachment trial in the Senate, which we don't really
Speaker 1: have yet, but the sort of rough guessing is it
Speaker 1: maybe starts around the second week in January, takes only
Speaker 1: a couple of weeks. I mean, you could literally have
Speaker 1: the president having been acquitted of impeachment the too impeachment
Speaker 1: charges days before he steps into the well of the
Speaker 1: House to to give his address on the State of
Speaker 1: the Union. The person who brought those impeachment articles, of course,
Speaker 1: the Speaker, Nancy Pelosi, staring right sitting right behind him. Actually,
Speaker 1: and I mean, it's just I feel like every day
Speaker 1: we come to work here, there's just another thing that's
Speaker 1: going to end up in the history books in this
Speaker 1: That Friday, that Tuesday, February fourth, will be another one
Speaker 1: of them. It will be surreal. Generally, you don't have
Speaker 1: an impeachment just having been completed in somebody giving their
Speaker 1: State of Union right afterwards. So I'm sure it'll be
Speaker 1: an interesting address, and I suspect they'll have record ratings.
Speaker 1: And so Craig tell us about this week. I mean,
Speaker 1: because I feel like all of us around this table,
Speaker 1: if you had told us a year ago, certainly five
Speaker 1: years ago, the level to which people were met about
Speaker 1: the idea of a president being impeached, we would have
Speaker 1: told ourselves we were insane. Am I wrong? No, You're
Speaker 1: resolutely right. And and and it's it's interesting because, as the
Speaker 1: Washington Beer rechief, I r in a Bureau of seventy
Speaker 1: five people that reports me. We cover this news every day,
Speaker 1: and I did feel myself having to give a couple
Speaker 1: of new Rockney style speeches like, hey, folks, this is
Speaker 1: a big moment. Let's not lose sight of that. It's
Speaker 1: just we were in like big moment overload. You know,
Speaker 1: every day, almost literally every day since Salstrom has been
Speaker 1: the president, something unbelievable has happened. He fires James Comey,
Speaker 1: he you know, the Muller Report, the Muller testimony, he
Speaker 1: go right down all the list, all the all the
Speaker 1: moments we remember. And so when it finally comes to
Speaker 1: again the ultimate sanction of the United States Congress against
Speaker 1: the president impeachment, it was a little bit hard sometimes
Speaker 1: to muster the energy. Not part of that was just
Speaker 1: like we all knew there was a foregone conclusion and
Speaker 1: you know they were going to get the majority in
Speaker 1: the House. There was never any drama or question about that.
Speaker 1: You know, it was hard to get excited about will
Speaker 1: any Democrats to fact, I guess two or three ended
Speaker 1: up defecting that We kind of even knew who those
Speaker 1: people were gonna be, So there was some of the
Speaker 1: drama was just wrung out of it by the by
Speaker 1: the sheer inevitability of it um. But what did add
Speaker 1: certainly a little bit of spice to the day was,
Speaker 1: you know this split screen moment where you have the
Speaker 1: President United States that rally and Battle Creek, Michigan literally
Speaker 1: as the gavel is falling on his impeachment for several minutes,
Speaker 1: not knowing that, and you know, so he's sort of
Speaker 1: giving a lot of his standard lines as which hunt
Speaker 1: is unfair and then no president ship to go through this,
Speaker 1: and we all know something that the President United State
Speaker 1: saysn't know that he's all right, actually just been impeached.
Speaker 1: And there was actually quite a moment where one of
Speaker 1: his staffers I believe was one of his staff stenographers
Speaker 1: literally held up a giant white, you know, sort of
Speaker 1: piece of poster board that had the vote on it
Speaker 1: that uh and then he could read it and we
Speaker 1: could watch him reading it, and we saw him reading it,
Speaker 1: and then he read it and he said, oh, no
Speaker 1: Republicans woke, so you know whatever. So you know, the
Speaker 1: just again, you almost words almost fail you as you
Speaker 1: try to capture the history of it. And yet that
Speaker 1: day there was a certain amount of equality and watching
Speaker 1: paint drive what's hard to run believe really is that
Speaker 1: for two years Bob Muller did an investigation. Most people
Speaker 1: thought something would come from that that would be perhaps
Speaker 1: not favorite bo to the president, but nothing really came
Speaker 1: out of that. Then I whistle blower sent in an
Speaker 1: anonymous letter three months ago, and in three months you're
Speaker 1: at the stage. Who would have predicted that? Yeah, I mean,
Speaker 1: I think I think the one place where Trump, you know,
Speaker 1: there's a he has a little bit of of a
Speaker 1: little ground to stand on, is like, folks, you spent
Speaker 1: two years you hired Robert Mueller. Everybody told me he
Speaker 1: was the prosecutor's prosecutor, the you know, the most honest
Speaker 1: man on earth and whatever. And he put out his report.
Speaker 1: He we all know, he didn't exonerate the president entirely
Speaker 1: on the obstruction of justice. Party sort of did in
Speaker 1: the coclusion part, and the Democrats really did kind of
Speaker 1: have to just sweep all that aside until this new
Speaker 1: thing came along from the whistle blower. And it's not
Speaker 1: my job to decide, you know, whether that's impeachable or not,
Speaker 1: but it is sort of remarkable. And this is the
Speaker 1: one thing that I do think Trump can can make
Speaker 1: some hay on in the campaign trail that the investigation
Speaker 1: that was supposed to bring me down bring me didn't
Speaker 1: bring me down, so they had to come up with
Speaker 1: something else. Right Now, look what the whistle blower says,
Speaker 1: pretty dramatic. We all know the facts of the case.
Speaker 1: He called the guy in Ukraine and said, should investigate
Speaker 1: Joe Biden and the guys. Let me get back down
Speaker 1: that and you know whatnot But you know, again, over
Speaker 1: three and a half years of Donald Trump's presidency, essentially
Speaker 1: it was really just the thing that happened the last
Speaker 1: two months that led to his impeachment, and that alone,
Speaker 1: I think will give him something to whip up his
Speaker 1: crowds with, which is quite good at doing, without addressing
Speaker 1: the merits of the impeachment, the effort, and so forth.
Speaker 1: I do wonder if the approach that had been used
Speaker 1: by Ronald Reagan when he dealt with Iran Contra had
Speaker 1: been used here, whether this would have faded away. In
Speaker 1: other words, a speech by the president saying I didn't
Speaker 1: quite understand the implications of what I was saying, I'm
Speaker 1: sorry I made a mistake, whether that contrition might have
Speaker 1: kept this from going forward and obviously work with Ronald
Speaker 1: Reagan because many people at the time we're thinking he
Speaker 1: should have been impeached for the Iran contra thing, and
Speaker 1: then he made a speech that kind of diffused all
Speaker 1: of that. Obviously the president didn't choose to do that,
Speaker 1: but I think historians will always debate whether something like
Speaker 1: that might have made a difference. Yeah. I mean, we
Speaker 1: have been struck many times that there are two words
Speaker 1: that do not seem to exist in Donald Trump's vocabulary,
Speaker 1: and they are i'm sorry. So you're right in that
Speaker 1: case where Reagan, at that point, somewhat somewhat of a
Speaker 1: line in winter, somewhat of a fading figure, still had
Speaker 1: enough of a reservoir of goodwill to tap into to say, hey, yeah,
Speaker 1: I probably should have done that or I'm sorry. I'm
Speaker 1: just not sure. Trump his reservoir is empty. There was
Speaker 1: not much to begin with, so that would have been
Speaker 1: a harder trip for him to pull off. Recognized it
Speaker 1: was probably unlikely would do that. I just wondered if
Speaker 1: somebody other than Trump had had this same situation and
Speaker 1: you said I'm sorry, Because generally and in society, people
Speaker 1: get away with a lot when you say i'm sorry.
Speaker 1: I made a mistake and people are willing to forgive people.
Speaker 1: But obviously that's not this situation. Well, the story goes on.
Speaker 1: We know that after the first of the year, at
Speaker 1: some point, maybe before the articles will be sent to
Speaker 1: the Senate, and the story goes on, we will count
Speaker 1: on Creig Gordon and his team here in Washington to
Speaker 1: bring it to us. Craig Gordon, Executive Editor, Washington Bury
Speaker 1: chief for Bloomberg, joining David Rubinstein and myself here in
Speaker 1: our one studio. Coming up, I'm gonna talk a little
Speaker 1: bit about trade. You are listening to Bloomberg Business Week
Speaker 1: Jason Kelly the studio in d C. Alongside David reuben Stein,
Speaker 1: co founder of Carlisle Group and with us now Sean Donnin,
Speaker 1: senior trade reporter for Bloomberg, one of the busiest guys
Speaker 1: across the empire. Sean, great to be with you in
Speaker 1: your town, thanks to having me. All Right, So a
Speaker 1: big week, to say the least, on a couple fronts
Speaker 1: as it relates to trade. Let's talk about China first.
Speaker 1: What happens next? We're gonna actually get something signed? Yeah, well,
Speaker 1: you heard Will Burross there. It looks like they're in
Speaker 1: the final stages of getting something translated. Was talking to
Speaker 1: someone close to the process yesterday who said they're basically
Speaker 1: trading drafts in Chinese right now that are going back
Speaker 1: and forth across the Pacific U I guess you go
Speaker 1: with email on that one. They're talking by um the
Speaker 1: phone as well throughout still working out the details of
Speaker 1: a signing, but the plan at this point is for Luja,
Speaker 1: the Chinese Vice Premier, to come to Washington in the
Speaker 1: first couple of weeks of January and to sign this
Speaker 1: thing with Bob Leitheiser, the U S Trade representative, who
Speaker 1: of course led the negotiations. I think this is agreement
Speaker 1: that doesn't do everything that everybody wanted out of this agreement,
Speaker 1: but it does get enough done so that I think
Speaker 1: the market uncertainty that arose because of the China dispute
Speaker 1: is probably gone for a while. So, in other words,
Speaker 1: every issue with China is not going to be resolved,
Speaker 1: but the market is no longer going to say, what's
Speaker 1: happening with China? What are we gonna do? And I
Speaker 1: think this for the time being is a pretty good
Speaker 1: deal for that purpose. Yeah. No, there's no question that
Speaker 1: this absolutely kind of puts at least a pause on
Speaker 1: any escalation or the prospect of any escalation. I think
Speaker 1: one of the things that's remarkable is, UH, we always
Speaker 1: forget just how far we've come. A year ago we
Speaker 1: had tariffs on fifty billion dollars in imports from China.
Speaker 1: We now have tariffs on three hundred sixty billion dollars
Speaker 1: in imports from China. Two hundred and fifty billion dollars
Speaker 1: of those imports are subject to UH tariff that is
Speaker 1: likely to continue for the foreseeable future. It is not
Speaker 1: going to be rolled back as part of this trade deal. UH.
Speaker 1: And so one of the questions is going to be
Speaker 1: for businesses I think is UH. You know, the administration
Speaker 1: likes these tariffs. The presidents really likes these tests because
Speaker 1: he thinks they're causing supply chains to shift. But whether
Speaker 1: we get into a more permanent shift and in terms
Speaker 1: of businesses, in terms of supply chains and adapting to that.
Speaker 1: But there's still a lot of uncertainty hanging out there,
Speaker 1: not as much as there was. I think the President
Speaker 1: does like tariffs in part because it's something he can
Speaker 1: do by himself. He doesn't need to go to Congress
Speaker 1: or get the courts to approve it. So that's something
Speaker 1: that is real presidential power. I think the real issue
Speaker 1: that Bob Leitheiser wanted to address and hasn't yet addressed
Speaker 1: because it wasn't politically feasible, is the China five issues.
Speaker 1: Those are the issues that people think next ten twenty
Speaker 1: years are the more serious ones, which is to say
Speaker 1: that China wants to use its government money and resources
Speaker 1: to enable its companies to be a leader in semiconductor
Speaker 1: for auction, semichinductor sign artificial intelligence five G. That's the
Speaker 1: future of trade and the future of technology, and those
Speaker 1: issues for lots of reasons, just couldn't be addressed right now. Yeah,
Speaker 1: And well, I mean and and that's the big question,
Speaker 1: right I mean, if we look at Phase one is
Speaker 1: a pause with some commitments from the Chinese on intellectual
Speaker 1: property that we don't know the details of yet, some
Speaker 1: commitments on currency manipulation to not do it, uh, some
Speaker 1: commitments on opening up the financial sector. Uh. And of
Speaker 1: course these big agricultural purchases, the President saying that we're
Speaker 1: talking about two hundred billion dollars and purchases and manufactured
Speaker 1: and agricultural goods over two years. But I mean, really,
Speaker 1: this is a pause and the big issues like that issue,
Speaker 1: those issues of me and China, and the broader issue
Speaker 1: of industrial subsidies uh in China. I mean, that is
Speaker 1: what fueled the rise of industrial China, and that is
Speaker 1: the reason we talk about China. Is this great economic
Speaker 1: power in the world today, is this web of industrial subsidies,
Speaker 1: whether it's cheap owns or cheap electricity, those aren't going away. Well,
Speaker 1: let me try to explain it in my terms that
Speaker 1: I often understand this. The trade deficit was a problem
Speaker 1: and it was very recognizable. So if you're a presidential
Speaker 1: candidate or president, you could say, the trade deficit is
Speaker 1: too high. I've got to do something about it. This
Speaker 1: might have some moderating effect and it won't dramatically change it.
Speaker 1: But there hasn't been a political issue that people vote
Speaker 1: on China. People don't quite understand that. So if you're
Speaker 1: warning for re election in two thousand twenty, if you've
Speaker 1: got the Phase one deal done, I think you don't
Speaker 1: have any political problems of saying we'll deal with China later.
Speaker 1: I think that's right. And I think you've also got
Speaker 1: these tariffs in place, which will satisfy the Hawks that
Speaker 1: you are taking action and that you are taking a
Speaker 1: hardline against China for the time big so Sean, before
Speaker 1: we let you go the other thing U s m
Speaker 1: c Asma as we so findly call it here on
Speaker 1: our show. Uh success, it happened now to two point?
Speaker 1: Oh well, it hasn't happened that just yet and closed
Speaker 1: to have always the way with trade. Still needs to
Speaker 1: go through the Senate, but a a remarkable vote in
Speaker 1: the House of Representatives yesterday with three five members of
Speaker 1: the House voting to back this trade agreement. I go
Speaker 1: back to what Bob Leidheiser said two years ago when
Speaker 1: he said, I need to have a big bipartisan vote
Speaker 1: on a new NAFTA. And this is just a renegotiation
Speaker 1: of NAFTA, we need to remember. But I need to
Speaker 1: have a big bipartisan vote because I want to rewrite
Speaker 1: the politics of trade in America. And the big question
Speaker 1: today is, now we've got this big bipartisan vote, are
Speaker 1: we going to go into a different world when it
Speaker 1: comes to the next trade A Graham, all right, We're
Speaker 1: gonna leave it there, Sean Donn and always good to
Speaker 1: catch up with you, Senior Trade reporter for Bloomberg. We're
Speaker 1: gonna be talking about trade a lot in I have
Speaker 1: a feeling, and we're gonna count on Sean. He always
Speaker 1: brings us the real contours of this, whether it's in
Speaker 1: Michigan or as it relates to Booze. So stay tuned
Speaker 1: for all of that. You are listening to Bloomberg Business
Speaker 1: Week here on a Friday afternoon, Jason Kelly and David
Speaker 1: Reuben sign in our studio in Washington, d C. Well,
Speaker 1: let's talk a little bit about a big story in
Speaker 1: Bloomberg business Week magazine, on the Bloomberg and at Bloomberg
Speaker 1: dot Com. It's about Rudy Giuliani, client number one, that
Speaker 1: would be the President United States. A deep dive of
Speaker 1: sorts and the latest on the former mayor of New
Speaker 1: York City. Stephanie joins us on the phone from London.
Speaker 1: Joel Weber, the editor Bloomberg business Week. He's in our
Speaker 1: Bloomberg Interactive Broker's studio. Stephanie, I want to start with
Speaker 1: you. You You have done so much great reporting about the UK,
Speaker 1: about Ukraine, about Rudy Giuliani. What is the state of
Speaker 1: Rudy at this point? Yeah, Well, Rudy has um Uh
Speaker 1: gone from wearing the hat of lawyer, consultant adviser to
Speaker 1: trying his hand at a form of journalism, if you
Speaker 1: can call it that, um. And he's been working on
Speaker 1: this documentary series with a right wing clit cable news
Speaker 1: network called O A n about the whole Ukraine impeachment inquiry,
Speaker 1: and he flew to Ukraine um Uh this month to
Speaker 1: interview various characters that have appeared in this impeachment inquiry,
Speaker 1: specifically former prosecutors. And he's been pushing this out um
Speaker 1: on his Twitter page and promoting it. He's been appearing
Speaker 1: less on Fox News and um you know, is trying
Speaker 1: to basically double down dial up the whole narrative that
Speaker 1: got Trump into the impeachment mess to begin with. Joel. So,
Speaker 1: you know, Stephanie has just done an incredible job on
Speaker 1: sort of this area of coverage. And we've done it
Speaker 1: in the magazine before from her. But the thing that
Speaker 1: I thought she did just an incredible job of revealing
Speaker 1: with this one is ultimately it's all about money for
Speaker 1: Rudy and life is expensive. Stephanie, what what did? What?
Speaker 1: Does it turns out it's like every month his life
Speaker 1: costs how much. Yeah, we got some of these figures
Speaker 1: from his divorce proceedings. He recently settled a divorce from
Speaker 1: his third wife, UM and from that it was revealed
Speaker 1: that he had about thirty million in assets which he
Speaker 1: accumulated over the past two decades on the consulting and
Speaker 1: legal circuit. But he was he and his ex now
Speaker 1: ex wife are now are spending two and thirty thousand
Speaker 1: dollars a month, So he has a very expensive lifestyle.
Speaker 1: And now when he stood down from his lall from
Speaker 1: Greenberg Tring to take on the role of Trump's personal lawyer,
Speaker 1: he did so unpaid, and he gave up about four
Speaker 1: to six million in annual income from his law firm,
Speaker 1: which left a big hole. And I think that's part
Speaker 1: of this story with Rudy Giuliani over the past eighteen
Speaker 1: months is uh he was on the one hand representing Trump,
Speaker 1: but on the other hand still having to fill that
Speaker 1: financial gap um and that led him to take on
Speaker 1: multiple clients um. And as we know from his interactions
Speaker 1: with these two Soviet born uh emigres who were recently
Speaker 1: arrested and indicted on campaign finance violations, Leved Harness and
Speaker 1: Ego Freuman. He took five thousand dollars from them last
Speaker 1: year and for what it what looked like a very
Speaker 1: shaky venture, um and from two characters who had a
Speaker 1: trail of debts, you know, behind them. And I think
Speaker 1: you know the driving force of Rudy Rudy Giuliani is
Speaker 1: is is partly money. And I think we still don't
Speaker 1: know where he has made his money while he's been
Speaker 1: representing Trump as his personal attorney. And I think that
Speaker 1: is where the serious conflicts of interests arise. And I
Speaker 1: think you know now that near prosecutors are examining both
Speaker 1: his business and political dealings with partners and frewman Um.
Speaker 1: You know, I expect more to come out on that.
Speaker 1: So Jason, that two thirty a month stands out to
Speaker 1: me because it seems like maybe a little bit more
Speaker 1: than your life costs a little bit more when you guys,
Speaker 1: do you know a household budgeting? It strikes me as
Speaker 1: a slightly high number. And I do think to Stephanie's
Speaker 1: point there it goes a long way in just sort
Speaker 1: of describing where what he's ultimately up against. Right, He's
Speaker 1: got to pay some bills and therefore there's a drive
Speaker 1: to actually like push the Rudy brand and all of
Speaker 1: its different facets to other corners of the world. Absolutely,
Speaker 1: I mean, you know, whatever he says that he's just
Speaker 1: Trump's personal lawyer or pro to that he was his
Speaker 1: cybersecurity advisor. Internationally, whenever he goes abroad, he is presented
Speaker 1: in the media as Trump's advisor, and he's treated like
Speaker 1: a foreign dignitary. So when he goes around the world
Speaker 1: pitching for his security clients, whether it's Bahrain or whether
Speaker 1: it's giving a speech for Nancy Iran speech where he's paid,
Speaker 1: he has seen as internationally as a representative of Trump
Speaker 1: or as a as a conduit or some way to
Speaker 1: get at Trump. Even though he will say very um,
Speaker 1: it's steadfastly that he does not lobby Trump, he does
Speaker 1: not engage in influence pedaling. Um. You know, the perception
Speaker 1: of clients abroad that hire him is that this is
Speaker 1: a way to get at Trump. David, what's your taking
Speaker 1: all this. I've never been prosecuted, and I've never been
Speaker 1: a prosecutor, so and I don't know Rudy Giuliani really
Speaker 1: that well. He nice disclaimers, but I would say that
Speaker 1: my impression is that people who are being looked at
Speaker 1: by prosecutors are generally well advised to stay out of
Speaker 1: the press. The prosecutors do not like people who are
Speaker 1: being investigated to kind of be very visible and almost
Speaker 1: flaunting what they allegedly are being investigated for. So I
Speaker 1: assume his lawyers are telling him not to be on
Speaker 1: television that much, not to be too visible, And I
Speaker 1: think my impression would be that would be a very
Speaker 1: good advice. But again I don't know the substance of
Speaker 1: what they're looking at, but I would say being low
Speaker 1: key for a few months or maybe longer would be
Speaker 1: a good good thing to do, I think, which doesn't
Speaker 1: seem to be in his constitution. I was gonna say,
Speaker 1: didn't get that memo. It's, uh, well, I can't. I
Speaker 1: can't say as somebody who has his own TV show
Speaker 1: and as on this show that, uh you should you know,
Speaker 1: not be very visible. So I I, you know, I
Speaker 1: recognize the appeal of having a show or or being
Speaker 1: on radio, but I think it sometimes it's probably a
Speaker 1: good to lay low and just just do things that
Speaker 1: are counter to your nature. Right, Stephanie, what do you
Speaker 1: make of this sort of need to be so visible. Well,
Speaker 1: you know, there was a period there when he he
Speaker 1: has dialed back in terms of his media appearances. He
Speaker 1: has not been on Fox News as often as he
Speaker 1: has been. You know, he used he was renowned for
Speaker 1: taking uh phone calls from any reporter who who could
Speaker 1: get a hold of his number. And I had that
Speaker 1: early on in the year when I started reporting on
Speaker 1: his foreign business dealings back in February March, he spent
Speaker 1: a lot of time on the phone with me. He's no,
Speaker 1: he's no longer doing that with everyone. He's being quite
Speaker 1: selective as to who he actually responds to. You're more likely,
Speaker 1: and I think this is across the board by multiple
Speaker 1: reporters at different news outlets. You're more likely to get
Speaker 1: a text back from him than you already get a
Speaker 1: phone call, um, and that is very much different than
Speaker 1: it was at the beginning of the year. Now, having
Speaker 1: said that, in the past week or so, he does
Speaker 1: seem to be really dialing up, but he's doing it
Speaker 1: through this relatively safely fold format of this documentary series
Speaker 1: with this obscure channel. Alright, well, we learned a lot
Speaker 1: from your reporting. Appreciate you as always. Stephanie Baker, Financial
Speaker 1: Investigations senior writer for Bloomberg Joinius on the phone from London,
Speaker 1: Joe Webber. Back in our Bloomberg Interactive Broker studio. You're
Speaker 1: listening to Bloomberg Business Week with Carol Masser and Jason
Speaker 1: Kelly on Bloomberg Radio. All right, well, let's do a
Speaker 1: little Bloomberg economics now, well business Week Economics here at
Speaker 1: the top of the three o'clock our Wall Street time
Speaker 1: headed back to New York. I'm Jason Kelly here in Washington.
Speaker 1: But let's go back to our Bloomberg Interactor Broker studio
Speaker 1: for a moment. Alex Harris, their bond reporter, repo expert.
Speaker 1: All right, Harris, before we go into the weekend, tell
Speaker 1: us what we need to know that's going on. Is
Speaker 1: this whole repo mess solve now? Everything's good? Yeah, sure
Speaker 1: it is. Uh No, I think people are still keeping
Speaker 1: a close eye on it. We have more of these
Speaker 1: term operations next week that are going to span the
Speaker 1: end of the year, and so what we're trying to
Speaker 1: gauge at this point is, you know, will the take
Speaker 1: up from the dealers be less than what the Fed
Speaker 1: is offering? And is that starting to tell us that
Speaker 1: we might have some scarcity at the end of the year,
Speaker 1: you know, balance sheet scarcity, and and some difficulty intermediating
Speaker 1: in the repo market, which again we might not really
Speaker 1: know until we get to December thirty one, so everyone
Speaker 1: continues to keep an eye on it. I think it's
Speaker 1: probably going to be one of the more active segments
Speaker 1: of the fixed income market as we wind down the year, right,
Speaker 1: and the FED seems to be paying close attention to this.
Speaker 1: Stare to say, oh, yeah, absolutely, you know, I know that.
Speaker 1: You know, Zultime Posar has has said, oh, you know,
Speaker 1: if this gets out of hand, the Fed's coming in
Speaker 1: with QUE four at the end of the year. Well,
Speaker 1: I think we're about six business days away from the
Speaker 1: end of the year, so I think it's pretty safe
Speaker 1: to say that we can we can all sort of
Speaker 1: walk back that idea that they're coming in here. I think,
Speaker 1: you know, the ft is acknowledged that the repo market
Speaker 1: is going to be volatile, and I think people need
Speaker 1: to get used to that and remember that they just
Speaker 1: don't want so much volatility that it ends up moving
Speaker 1: the target policy rate, that FED funds rate and jeopardizes
Speaker 1: the target range, and so that's what they're really worrying about.
Speaker 1: But really what we're looking ahead, we're looking ahead to
Speaker 1: because this is where you know, people want to know, Okay,
Speaker 1: the fat is pumping all this liquidity into the market, Well,
Speaker 1: how are they going to unwind it? Can they unwind it?
Speaker 1: And that's going to be the big question. And actually, uh,
Speaker 1: we try and preview this idea this weekend with our
Speaker 1: year ahead piece on all of this, because it is
Speaker 1: very difficult. We've seen that the Fed has no problem
Speaker 1: getting into the markets, but they really have a hard
Speaker 1: time untangling themselves. And we saw that the balance sheet unwind.
Speaker 1: All right, we'll keep a close eye on it. We
Speaker 1: know you'll be keeping even closer eye on it. Alex Harrispond,
Speaker 1: reporter for Bloomberg, joining us in New York City. Well,
Speaker 1: turning our attention here to the nation's capital day of
Speaker 1: a drouven sign still with me, founder co founder of
Speaker 1: the Carlogge Group, co chairman, philanthropist, former economic advisor I
Speaker 1: believe domestic policy advisor to be more precise back in
Speaker 1: the Carter administration. Peggy Collins is also here with the
Speaker 1: managing editor of all of our economic coverage here in
Speaker 1: the United States. She's in our ninety one studio. So, David,
Speaker 1: how does the economy feel at this point before we
Speaker 1: break it down with Peggy. The economy actually feels reasonably good.
Speaker 1: The problem is that people can't believe it's just good
Speaker 1: this late in the cycle. So we've never had an
Speaker 1: economic growth period this long, certainly since World War Two.
Speaker 1: So people keep saying, how much longer can this keep
Speaker 1: going on for? And where are the signs of a crack?
Speaker 1: But there don't seem to be any signs of a crack.
Speaker 1: Everything seems to be going the way it should and
Speaker 1: even the uncertainty of the impeachment hasn't really affected the economy.
Speaker 1: So right now, I think it's in pretty good shape.
Speaker 1: What's your teamworking on, Pegs? Well, I think, as David said,
Speaker 1: we're in the eleventh year of this record mansion. So
Speaker 1: the question is really looking at the consumer, because they
Speaker 1: are really holding up this economy. Right now. We've seen
Speaker 1: consumer spending continue to hold strong. We had new revised
Speaker 1: GDP data that came in earlier this morning that reflected
Speaker 1: that that's still going on, and so what we're really
Speaker 1: starting to look at is in will that hold up
Speaker 1: The other thing that's really driving this, which is in
Speaker 1: conjunction with the consumer spending, is jobs. We've seen, you know,
Speaker 1: the lowest unemployment rate in fifty years that continues to hold,
Speaker 1: and you have some people looking at thinking that number
Speaker 1: could actually continue to go down. And one of those
Speaker 1: people is FED Chairman J. Powell. He's really said, look,
Speaker 1: the economy is in a good place, and I think
Speaker 1: if we can continue to roll along at this rate,
Speaker 1: that we could draw even more people out of the
Speaker 1: off the sidelines and into the economy who traditionally have
Speaker 1: had a hard time finding jobs, whether you're marginalized because
Speaker 1: of your race, or disability or whatnot. You know, when
Speaker 1: you spend time in the markets and you go up
Speaker 1: and down over many, many years, you're always looking for
Speaker 1: something bad to happen. And I suspect something bad will
Speaker 1: happen at some point, but I can't put my finger
Speaker 1: on what it is right now. The only issue that
Speaker 1: I would note is that the Congress just has agreed
Speaker 1: to a large spending bill, and we're going to be
Speaker 1: we're running deficits of one trillion one point two trillion
Speaker 1: dollars a year, three trillion dollars of debt. The markets
Speaker 1: seem to say big deal. Modern monetary theory says, who cares.
Speaker 1: But at some point I think we're gonna have to
Speaker 1: pay the price. And I don't know when that's going
Speaker 1: to be, but at some point we're gonna have to
Speaker 1: deal with the debt. And there were some questions talking
Speaker 1: about the reboil market, which Alex is an expert on
Speaker 1: on whether or not some of that spending by the
Speaker 1: government actually may have contributed to some of the imbalances there.
Speaker 1: I also think we did see signs this year that
Speaker 1: it's not rock solid. Right. So the trade war with
Speaker 1: the with the markets end with business investment was certainly
Speaker 1: something that started to have an effect on the manufacturing
Speaker 1: industry and business investment overall. You know, David better than
Speaker 1: probably anyone that when companies feel uncertain about where things
Speaker 1: are going, whether it's tax policy or the or the economy,
Speaker 1: they hold back. And when they hold back on investment, research, development,
Speaker 1: and hiring, that can flow through to the economy in
Speaker 1: a negative way. What are bringing some headlines that are
Speaker 1: just crossing the bloomberg now? Courtesy of dal Jones. SEC
Speaker 1: Enforcement staff has sought information on listings from Citadel securities
Speaker 1: specifically related to the listenings of Slack and other unicorns,
Speaker 1: according to tal Jones uh and focusing in part on
Speaker 1: the first day of trading, we will continue to look
Speaker 1: at that again. That breaking across the Bloomberg terminal right now,
Speaker 1: according to dal Jones, the SEC probing some listings there.
Speaker 1: So just in the forty five seconds or so we
Speaker 1: have left in this segment, David. From a policy perspective,
Speaker 1: how does it feel right now in terms of the
Speaker 1: administration and the Fed? I think the fetist feeling pretty
Speaker 1: good at better position right now. They've lowered interest rates
Speaker 1: three times this year. Yeah, I think most economists think
Speaker 1: they've done a pretty good job reading where the market
Speaker 1: should be. I don't think there's a feeling we're going
Speaker 1: to have any increase anytime soon, but also no decrease
Speaker 1: anytime soon. So I think the Fed is feeling pretty
Speaker 1: good about the situation. They have to monitor the repo market,
Speaker 1: and I UH, I think Congress is feeling they've done
Speaker 1: a reasonably good job leaving appeachment aside. They have not
Speaker 1: done anything to damage the economy, and the economy is
Speaker 1: moving along very nicely. Now. Some exogenous event of war
Speaker 1: breaking out, some pandemic breaking out can always make things different.
Speaker 1: But right now, I think people are gonna have a
Speaker 1: Christmas season that are going to be pretty filled with
Speaker 1: good times and not so much worries. There you go,
Speaker 1: all right, well, our thanks to Peggy Collins, managing editor
Speaker 1: of our US economic coverage. Here in Washington, David Reuben
Speaker 1: signed sticking with me for a little bit longer. You
Speaker 1: are listening to Bloomberg Business Week. Jason Kelly and David
Speaker 1: Ruben signed here in Washington, d C. Back in our
Speaker 1: Bloomberg Interactive Broker's studio, the co founders and managing partners
Speaker 1: of Harlem Capital Partners. We're talking about Henri Pierre, Jocks
Speaker 1: and Jared Tingle. Gentlemen, welcome to the show. Thanks for
Speaker 1: having us. All right, so, Henry Ray, excuse me, let
Speaker 1: me start with you. Tell us about the creation of
Speaker 1: Harlem Capital. What's the what's the story behind the story here? Yeah,
Speaker 1: So we started Harlem Capital December as an angel syndicate.
Speaker 1: We were investing our own personal capital. We worked on
Speaker 1: Wall Street, did that for about a year and a half.
Speaker 1: Realized there was a mark opportunity. People were talking about
Speaker 1: the lack of diverse founders, but we realized there was
Speaker 1: a lack of diverse investors. And then once fast forward
Speaker 1: a year and a half, Jared and I went to
Speaker 1: Harvard Business School. We were roommates there. Decided once we
Speaker 1: got to school that we felt like we had built
Speaker 1: a track record and there was a large mark opportunity,
Speaker 1: and so we launched the fund between our first and
Speaker 1: second year of business school and then announced the closing
Speaker 1: on the fund UH two weeks ago. So how much
Speaker 1: have you raised so far? So we raised forty million
Speaker 1: dollars for the first fun um and feel really fortunate
Speaker 1: to have six institutions who backed us. And what type
Speaker 1: of rates of return are you seeking for your investors? Yeah,
Speaker 1: so we're targeting for X gross for the fun giving.
Speaker 1: We're focused on seeds series a early stage from a
Speaker 1: check sized perspective. Typically we're doing a half a million
Speaker 1: ti million dollars and we're focused on women and minority
Speaker 1: founders based in the US and it can be anywhere
Speaker 1: in the U S. Is that right correct? We've invested
Speaker 1: in eight cities across nine industries, and you're focused on
Speaker 1: any type of area of technology, healthcare, what what? What?
Speaker 1: What might it be. Yeah, so we're industry agnosticum, but
Speaker 1: we don't invest in biotech, crypto. We don't do capital
Speaker 1: intentive industries like energy or infrastructure, where micro fund like
Speaker 1: ours will just get too diluted long term. How many
Speaker 1: staff people do you have to help with the two
Speaker 1: founders through the analysis? Sure? So it's us two founders,
Speaker 1: Henri and Jared. We have to venture partners Brandon and John.
Speaker 1: They both have more of a media entrepreneurship focus, but
Speaker 1: it's actually a pretty good angle. We get a lot
Speaker 1: of reach and a lot of great branding as a result.
Speaker 1: And then we have a senior associate who already joined
Speaker 1: us part time who will be joining us full time
Speaker 1: actually graduates from Yale Business School. And then we have
Speaker 1: another joining us as well who will be finishing up
Speaker 1: ross Michigan NBA and will be joining us in June. Okay,
Speaker 1: So very often in these kinds of funds, uh, some
Speaker 1: investors say I want to get the highest rate of
Speaker 1: return I can, And I think emerging managers who are
Speaker 1: new will have some really great opportunities and other people
Speaker 1: are ignoring them, so I can get in cheaply and
Speaker 1: get a good rate of return because of the price
Speaker 1: is low and so forth. Other people say, I'm trying
Speaker 1: to create a social good and do something good for society.
Speaker 1: So even if I get a lower rate of return,
Speaker 1: I think I'm helping society. Which of those two perspectives
Speaker 1: is that of your investors or yours? Yeah, I mean
Speaker 1: I think it's a combination of both. UM. We don't
Speaker 1: call ourselves an impact fund, were eventure fund with impact.
Speaker 1: We fundamentally believe that by investing underrepresenting founders, there's more
Speaker 1: outfits to be made. Typically, when we see these founders
Speaker 1: at the seed stage, they've been in business for two
Speaker 1: or three years, they've generated revenue and have customers because
Speaker 1: a lot of them don't have family and and they
Speaker 1: can't do the early stage rounds they have to do.
Speaker 1: They have to generate revenue and oftentimes have higher margins
Speaker 1: in order to actually sustain the business before they can
Speaker 1: do an institutionalized seed round. UM. And so for us,
Speaker 1: we think that you know, our impact is by creating
Speaker 1: more people of color and women, um who can have
Speaker 1: ownership and equity in their businesses. And we just fundamientily
Speaker 1: think that the wealth gap will not change just through
Speaker 1: education and six figure jobs, that you have to give
Speaker 1: equity to these founders, and it's been proven that a
Speaker 1: lot of them can't move up to the rankings in
Speaker 1: the top of these large organizations. And your definition of
Speaker 1: an emerging manager would be somebody it is a minority
Speaker 1: or a woman, and they have to own a majority
Speaker 1: of the general partnership of the fund in which you're investing.
Speaker 1: Is that correct? Correct? Our core demographic as women of
Speaker 1: all racists and then black and Latino men. Just to clarify,
Speaker 1: we're investing in VC back startups, So you're investing in startups. Yeah.
Speaker 1: So so, Jared, let me ask you this in the
Speaker 1: fundraising process, what was that like? What did you discover
Speaker 1: as you were going out to to institution ends who
Speaker 1: you know, as David just laid out, you know, may
Speaker 1: have different approaches to this, uh, this world of investing,
Speaker 1: that that, as you have said, is somewhat untapped. Sure.
Speaker 1: I think we realized three key things. One is that
Speaker 1: people aren't as liquid as you think. So as we
Speaker 1: were going to our close network of former bosses, banking,
Speaker 1: m d s, etcetera, it became quickly clear that not
Speaker 1: a lot of people can write more than the Hunter
Speaker 1: k Check and the fund or at least feel comfortable
Speaker 1: doing that because they may have equity in their company, etcetera,
Speaker 1: but not a lot of liquid assets. The second thing,
Speaker 1: we realized that sequencing matters, and so the way you
Speaker 1: go to market around building credibility with people that are
Speaker 1: close to you, then moving on to people outside your
Speaker 1: network they may have more capital, and then moving to
Speaker 1: institutions is a path that worked well for us. But
Speaker 1: in general, I think building up momentum credibility methodically is
Speaker 1: really important because if we went to some of the
Speaker 1: institutions that ended up coming into our fun like Vanderbilt, etcetera,
Speaker 1: it would have been a much type of conversation and
Speaker 1: going to them after you already had to established ourselves.
Speaker 1: So and the last thing, it's just relationships matter. Even
Speaker 1: the biggest institutions. We had to get a warm introduction.
Speaker 1: That's one of the reasons why weren't able to get
Speaker 1: in front of David. But hopefully for fund too may
Speaker 1: be able to do it. I'll take a look at
Speaker 1: it looking. I invested a lot of first funds. But
Speaker 1: let me ask you this, what did your family shaw
Speaker 1: you go to Harvard Business School, maybe called up some debt.
Speaker 1: They want you to go to Goldman, Sacks or Mackenzie
Speaker 1: and you're saying, no, I'm starting on a new fund
Speaker 1: that's going to be complicated to get off the ground.
Speaker 1: But trust me, what did your family say only thirty
Speaker 1: seconds left? Yep, it was tough. I apply for big
Speaker 1: mega fund stuff. Um, we got a lot of traction.
Speaker 1: I think they said it was up to me, but
Speaker 1: everyone gave me pretty pretty negative feedback because until it's real,
Speaker 1: it's tough for people to see the vision. But the
Speaker 1: proof is in the pudding. And because we're able to execute,
Speaker 1: they ended up coming around eventually. Look, they told Warren
Speaker 1: Buffett he didn't know what he was doing at the
Speaker 1: beginning either, so you might pull it off. Congratulations, all right,
Speaker 1: great to talk to you guys, and Ridy Pierre Jacques
Speaker 1: and Jared Tingle, co founders managing partners of Harlem Capital Partners.
Speaker 1: You are listening to Bloomberg Business Week. Well. Earlier this
Speaker 1: week on the David Reubenson Show Peer to Peer Conversations,
Speaker 1: Former Treasury Sectory Hank Paulson talked with David, my co
Speaker 1: host today about steering the US economy through the financial
Speaker 1: crisis back in O eight and the state of financial
Speaker 1: authorities today. Let's listen in so Lehman was on the
Speaker 1: verge of going bankrupt and who did not have at
Speaker 1: that time the authority to save Lehman. I know everybody
Speaker 1: has asked you about that since then, But in hindsight,
Speaker 1: is there anything you could have done differently with respect
Speaker 1: to Lehman? Boy, I'll tell you, I don't think there was.
Speaker 1: We tried everything we could to get a buyer. Uh, Lehman,
Speaker 1: it was a bigger problem even than bear Stearns because
Speaker 1: they're insolvent. There was a big capital hole. Uh. There
Speaker 1: was no way that alone was going to solve the problem.
Speaker 1: It was going to a capital or a loan guarantee. Okay,
Speaker 1: And ultimately the banking system came back and the financial
Speaker 1: system came back. But as you look at the system today,
Speaker 1: could something like that happen again? With the legislation we
Speaker 1: now have, are we better be able to protect against
Speaker 1: something like that? First of all, our financial system is
Speaker 1: much stronger than was. The banks are better capitalized. It's
Speaker 1: much less likely to start in the US. There's less
Speaker 1: dry tinder to start a fire. But and I hate
Speaker 1: to say this, but we have less authorities today than
Speaker 1: we had that and the number one problem we had then,
Speaker 1: the number one problem by far, was we had a
Speaker 1: financial system that had outgone our regulatory system. Our regulatory
Speaker 1: system and authorities have been put in place after the
Speaker 1: Great Depression when there was a run on banks and
Speaker 1: we had a situation where the credit was flowing outside
Speaker 1: of the banking system, all right, And that is former
Speaker 1: US Treasury six or Hank Paulson speaking with my co
Speaker 1: host today, David Rubinstein for his show that David Dubenstein
Speaker 1: show appeared to peer conversations. So, David, uh, that was
Speaker 1: just a snippet from Hank Paulson. Obviously that was an
Speaker 1: unbelievable time. You lived through it as well. What did
Speaker 1: you take away from Hank in terms of his perspective now,
Speaker 1: you know, eleven years on from all of that, Well,
Speaker 1: I think he feels that they did everything they realistically could,
Speaker 1: and all the analyzes that have been done since then
Speaker 1: have not come up with anything that said they should
Speaker 1: have done this differently. They didn't create the financial problem,
Speaker 1: they really inherited. It came about for many years of
Speaker 1: debt being built up. It's hard to believe. But the
Speaker 1: House of Representatives did not pay us to tarp legislation
Speaker 1: the first time, right, And that is when people thought
Speaker 1: we are going down because we didn't passed TARP, we
Speaker 1: have no remedy. Today, I think he's right, it would
Speaker 1: be harder for that to happen because we have greater
Speaker 1: protections and so forth. What I actually got to the interview, though,
Speaker 1: in part, was this, Hank Paulson is unlike many former
Speaker 1: Treasury secretaries. They he has not gone back into business
Speaker 1: to make take advantage of his visibility, which he could
Speaker 1: have done. What he's done is he's basically um doing
Speaker 1: two things. Environmental protection in the United States. He's a
Speaker 1: big passion environmentalist and secondly improving U S. China relationships.
Speaker 1: But unlike many people go to China to do things there,
Speaker 1: he has no interest in making money. He's only there
Speaker 1: to try to improve the relationship and in part to
Speaker 1: improve the environment there as well. So a very admirable person.
Speaker 1: And I was in the meeting that h the Bloomberg
Speaker 1: Organization organized recently at in China. The conference and S
Speaker 1: G Ping presided over the a meeting we had, and
Speaker 1: the two Americans who spoke who were most listened to
Speaker 1: the Chinese were Henry Kissinger, not surprisingly, and Hank Paulson.
Speaker 1: And Hank Paulson has now been the China over a
Speaker 1: hundred and fifty times, my goodness, and so he is
Speaker 1: indefatigable and going there. He started when he was uh
Speaker 1: um and at the go office of of Goldman Sacks
Speaker 1: before he was CEO, and he knows this place as
Speaker 1: well as any business person in the world who's not Chinese.
Speaker 1: So very admirable person. And I think the interview was
Speaker 1: quite revealing. And so what does he say about the
Speaker 1: future of U S. China relationship. He think there is
Speaker 1: some tension. He doesn't want to say everything is perfect.
Speaker 1: He would say that perhaps, And I think he said
Speaker 1: in the interview that the way that sometimes the administration
Speaker 1: articulates his position might not be the way he would
Speaker 1: have articulated it. But he likes to maintain his relationship
Speaker 1: with the administration, so he's pretty private about his views.
Speaker 1: But I think he does have enormous cloud in China,
Speaker 1: and I think he's got pretty good access to people
Speaker 1: in this administration because they respect what he's done. You
Speaker 1: think other people will follow the playbook he has and
Speaker 1: not sort of go back into the money making realm posts.
Speaker 1: I think his view was he was never that interested
Speaker 1: in making a large sum of money and he was
Speaker 1: a Goldman. Goldman did very well. So he's not uh yeah,
Speaker 1: he's fine, but he's giving away all his money. Basically
Speaker 1: has uh committed to give his children are very modest
Speaker 1: amount of money relatively speaking, and and he's giving away
Speaker 1: all of his money. Yeah. Interesting guy, Well, it's a
Speaker 1: really interesting interview. And we're gonna talk a little bit
Speaker 1: later in the show about what you've learned from this show.
Speaker 1: It's the David Ribbon Stidine Show, Peer to peer Conversations.
Speaker 1: This week's episode, the most recent episode. You just heard
Speaker 1: a snippet of it there is with former Treasury Treasury
Speaker 1: Sector Excuse me, easy for me to say, Hank Paulson. Uh,
Speaker 1: you just heard a bit about steering the US economy
Speaker 1: that moment, uh, those critical critical moments when Lehman wasn't
Speaker 1: say bear Stearn's obviously saved and the brink of collapse
Speaker 1: that we certainly stared across steered into the ABYSS certainly
Speaker 1: just a few years ago a journal Yeah, but you
Speaker 1: let me drive. Oh no, no, no, no no, honey, please
Speaker 1: excuse me, I want to drive, Just drive baby. Good
Speaker 1: questions the drive to the Globe Commune. Thanks, we'll drying
Speaker 1: us Dawn on Bloomberg Radio, and it's time for the
Speaker 1: Drive to the close. Now. Michael Cogino back with this,
Speaker 1: President and portfolio manager of the Permanent Portfolio family of funds,
Speaker 1: looking after about two point three billion dollars. He joins
Speaker 1: us on the phone from San Francisco here with David
Speaker 1: Rubinstein and myself in Washington. Michael, great to have you back.
Speaker 1: Good afternoon Jason and David, and happy holidays, Thank you
Speaker 1: and to you all right. So we're coming towards the
Speaker 1: end of the year, the last working day for many
Speaker 1: people as they look forward to taking the week of
Speaker 1: Christmas off. How do you feel about twenty nineteen. I
Speaker 1: think it's been a real good year for a lot
Speaker 1: of different asset classes. If you look at what's going
Speaker 1: on this year, every asset class that's some degree has
Speaker 1: had its day in the sun. Whether it's been gold
Speaker 1: and silver, whether it's been equities which you bled up
Speaker 1: all year, whether it was the rally in the bond
Speaker 1: market caused by the FEDS change in direction. So I
Speaker 1: think it's been a solid year all the way around.
Speaker 1: Economic growth has been maybe a little lesson people had
Speaker 1: hoped for. Um. You know, you can point to trade
Speaker 1: issues and potential uncertainty with respect to monetary policy, um,
Speaker 1: But by large, um, you know, it's been a good year,
Speaker 1: and the expectations are it's going to continue at least
Speaker 1: into the first half of twenty I agree with that.
Speaker 1: I think people are feeling pretty good about next first
Speaker 1: first six months or next year. For sure, we don't
Speaker 1: see any real clouds on horizon. Inevitably, something bad can happen,
Speaker 1: But right now I think people are feeling pretty good,
Speaker 1: and I expect that people are gonna feel pretty good
Speaker 1: during the Christmas season. And so, Michael, trade, is that
Speaker 1: something that you might worry about again or is this enough,
Speaker 1: this phase one deal to sort of take it essentially
Speaker 1: off the table from a or at least from the
Speaker 1: top of the list or near the top of the
Speaker 1: list for investors to worry about. Well, as a broad statement,
Speaker 1: I think the trade has been reduced as a risk
Speaker 1: factor going into the new year. Now, when you say trade,
Speaker 1: you know there's a lot of subcompelments to that. So start. Yeah,
Speaker 1: I think it was a low, low expectations and low
Speaker 1: execution deal. Okay, they agreed on the simplest things they could.
Speaker 1: That's probably all we're gonna get now, especially going into
Speaker 1: an election year, and there's some structural issues that really
Speaker 1: need to be ironed out that I don't think you're
Speaker 1: going to be short term solutions. So you did the
Speaker 1: best you could, and you took a risk off the table.
Speaker 1: The new NAFTA, assuming it gets approved, not a whole
Speaker 1: lot different than the old NAFTA, maybe some marginal improvements,
Speaker 1: but again taking the risk off the table, ensuring that
Speaker 1: we've got Western Hemisphere free trade going on and maybe
Speaker 1: some improvements is a good thing for the markets. Um.
Speaker 1: And then with Europe you have isolated issues. You know,
Speaker 1: the potential for a British British only deal has gone
Speaker 1: up quite a bit with an expectation of the recent
Speaker 1: action that um, you know we are going to have
Speaker 1: a Brexit, so that opens the door for an England deal.
Speaker 1: And with the EU you've got isolated issues with various
Speaker 1: countries that I think can be worked out and probably
Speaker 1: for the benefit of all we ought to get along
Speaker 1: with those guys as best we could and clean up
Speaker 1: any loose ends and and have more freer trade there
Speaker 1: as well. So broadly, risk factors gone and hopefully optimistic
Speaker 1: viewpoints going forward. I think the President would no doubt
Speaker 1: say in the campaign, I got these two big trade
Speaker 1: agreements done. I got the Korean in Japanese one as well,
Speaker 1: And you won't know, no one will know whether they
Speaker 1: really work until probably after next November, so for quite
Speaker 1: some time, I think somebody can say in the administration
Speaker 1: we got some deals got done, and then the will
Speaker 1: take their time to work their way through the system.
Speaker 1: So I think there'll be some bragging points the administration
Speaker 1: would have. Obviously members of Congress want to take credit
Speaker 1: for U S m c A improvements, but I think
Speaker 1: the President will probably get the lion's share of the
Speaker 1: credit for that deal. And so when you talk to
Speaker 1: your customers, Michael, what are they most worried about as
Speaker 1: we think about the first three to six months of
Speaker 1: the year, You know, not really not much right now,
Speaker 1: which which is interesting because you know there are a
Speaker 1: lot of risk factors out there. I think they've been
Speaker 1: clearly defined and and I think you get tired of
Speaker 1: talking about them sometimes. But by and large, the economy
Speaker 1: is working. People record low unemployment, consumers are spending, businesses
Speaker 1: are spending. The growth and clipper profits has been down,
Speaker 1: but clipper profits are still growing a little bit um
Speaker 1: and you've got lower corporate taxes, so more money is
Speaker 1: being spent productively. Inflation is low, and monetary policy to
Speaker 1: cost the capital is low, so you don't generally see
Speaker 1: recessions start with that fact pattern, So that that's the
Speaker 1: reason for optimism, and realistically it's probably not misplaced given
Speaker 1: the landscape at the moment. These things can change quickly, though,
Speaker 1: and I think you need to keep that in mind.
Speaker 1: And we are potentially late psychle. I think one of
Speaker 1: the biggest things the markets are dealing with is are
Speaker 1: we late cycle going into recession or are we pausing
Speaker 1: within a broader growth trend, And that seems to be
Speaker 1: the one big question I think investors are trying to
Speaker 1: figure out on our n and I think one of
Speaker 1: the big things that happened this year was that there
Speaker 1: was kind of the air taking out of the unicorns,
Speaker 1: particularly we work for example, and uber uh didn't do
Speaker 1: quite as well as people had thought, and therefore you
Speaker 1: might expect that some people would say, well, well, let's
Speaker 1: be more wary of the technology cycle and also the
Speaker 1: technology sector. But I don't think that's really happened. Yes,
Speaker 1: there's a couple of people, a couple of deals people
Speaker 1: are worried about, but generally people are still putting money
Speaker 1: in venture capital, still still giving high valuations to our
Speaker 1: leading technology companies, and the leading technology companies are five
Speaker 1: or six big technology companies are really booming. Yeah, absolutely,
Speaker 1: all right, Michael Cogino, we're going to let you go,
Speaker 1: Thank you so much, President, portfolio manager of the Permanent
Speaker 1: Portfolio family of funds about two point three billion dollars
Speaker 1: under management. He joined us on the phone from San Francisco. Well,
Speaker 1: David Rubinstein, I'm gonna you know, I'm gonna let you
Speaker 1: get back to your actual day job. Although, let's be honest,
Speaker 1: like your coolest job is being the host of the
Speaker 1: David Uban sign Show, Right, that's what I look forward
Speaker 1: to the most. But since there's no carried interest in
Speaker 1: interviewing that, and I have to go back to my
Speaker 1: day job. But thank you very much for inviting me today. No,
Speaker 1: it's been a lot of fun, and I do wonder,
Speaker 1: you know, just in a couple of minutes we have left.
Speaker 1: As you look back on twenty nineteen, like, what's going
Speaker 1: to be the defining moment you think from your perspective
Speaker 1: as an investor of philanthropist TV has Well, I'd say
Speaker 1: the economy. The big news of the year was basically
Speaker 1: that the the year powered through pretty well. We didn't
Speaker 1: get any of the recession kinds of things that actually
Speaker 1: people predicted at the beginning of the year. And politics,
Speaker 1: the big news will obviously be the impeachment. UM. In international,
Speaker 1: I think the big news was probably the trade agreement
Speaker 1: with China, the first phase getting done, and the Brexit
Speaker 1: vote that occurred, and and and and the election in
Speaker 1: Europe UM. I think those are probably the big pieces
Speaker 1: of news. I think, Uh, Generally, people entered the year
Speaker 1: some somewhat nervous about the economy and the politics, and
Speaker 1: I think they're probably leaving the year feeling pretty good
Speaker 1: about the economy. People probably know where the impeachment thing
Speaker 1: is going to go, so I don't think they're that
Speaker 1: worried about it, even though it's got to play itself out.
Speaker 1: So other than a new book from you in twenty
Speaker 1: what else can we expect from David Rubinstein. Well, I
Speaker 1: hope to lose with some pounds. I'm going to go
Speaker 1: exercise my usual five minutes a day. We'll probably go
Speaker 1: from five minutes or ten minutes um and hopefully I
Speaker 1: can lose a pound by during the year. Now, well,
Speaker 1: that's a good goal. We all have to uh to
Speaker 1: have goals for sure, and I assume you will be
Speaker 1: active in your philanthropy as well. As I was landing
Speaker 1: last night in Washington, I marveled at the now repaired
Speaker 1: Washington Monument things. Yes, it's open, the elevators fixed, and
Speaker 1: now we're working on the Lincoln Memorial and the Jefferson
Speaker 1: Memorial and Arlington House. Hopefully the next year or two
Speaker 1: some of those will be open with those changes. All right, Well,
Speaker 1: a lot more to talk about when next you come
Speaker 1: to visit. I really appreciate you spending some time with
Speaker 1: me today. Always good to have your perspective, And most pointedly,
Speaker 1: I loved being on the phone or on the air
Speaker 1: with you as you were talking to an emerging investor.
Speaker 1: I got a sense of what it might be like
Speaker 1: to be across the table from you Ray seeing some money.
Speaker 1: Thanks for listening to Bloomberg Business week. You can subscribe
Speaker 1: to the podcast on iTunes, SoundCloud, or Bloomberg dot com.
Speaker 1: You can also listen to our radio show every weekday
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