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Speaker 1: Ye. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene

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Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. This

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Speaker 1: guest is a Steve serious, absolutely financial. It's another diplomatic

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Speaker 1: spat between Russia and the rest of the world. Just

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Speaker 1: days before Russia's presidential election kicks off. The president himself,

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Speaker 1: Vladimir Putin, is actually barely campaigned because guess why, all

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Speaker 1: victories all but assured. It's Dantana bound. P WC Global

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Speaker 1: Sanctions Leader, Dan, you have to look at Russia so much,

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Speaker 1: I imagine, perhaps more so over the last week. What

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Speaker 1: are we expecting to happen next? How does this escalate

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Speaker 1: if at all? Yeah, and Tom, it was one night

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Speaker 1: in the Moscow hotel and then I fled the country

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Speaker 1: before daylight the next morning. Um, this what came out

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Speaker 1: yesterday with Russia wasn't really a surprise. UM. Most of

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Speaker 1: the people on that list that we're designated, we're already

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Speaker 1: designated under the last administration. They didn't have assets in

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Speaker 1: the US, so this may have been more symbolic than

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Speaker 1: anything else, you know, for those of you keeping track,

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Speaker 1: there was a list that came out at the end

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Speaker 1: of January and shortly before midnight and a congressional mandated deadline,

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Speaker 1: which was really just a list of the wealthiest people

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Speaker 1: in Russia. What people are expecting next is a list

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Speaker 1: of bad oligarchs, those that were tighter to the Putin

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Speaker 1: regime that they may want to put a pinch on.

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Speaker 1: Excuse me, I'll take it. What's the difference between a

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Speaker 1: good and a bad oligarch? Waiting for the administration to

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Speaker 1: clarify that, but essentially the Trump seriously, the Trump administration

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Speaker 1: tries to figure out who's good who's bad? I mean,

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Speaker 1: really and good and bad. I'm making light of. What

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Speaker 1: they're really trying to do, you know, is force a

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Speaker 1: change in behavior of the Putin administration for the Russians

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Speaker 1: to get prid me A back to the Ukraine. To

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Speaker 1: do that, you have to hit closer to the Putin administration,

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Speaker 1: to his cronies. I want to take this visceral in

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Speaker 1: New York City. I was up on ninety one Street

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Speaker 1: yesterday with the Russian Consulate happens to be, and the

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Speaker 1: line was out the door of good citizens speaking to

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Speaker 1: their nation, Russian citizens, U sits whatever, speaking to their

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Speaker 1: nation about moving back and forth, which is visas. Do

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Speaker 1: is that where this is heading is a real restriction

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Speaker 1: on the movement of average Russians. No, not at all,

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Speaker 1: And it's still Americans can still get visas to travel

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Speaker 1: to Russia, albeit single entry visas that are good for

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Speaker 1: about five days um. But that being said, no, this

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Speaker 1: isn't going to be a travel restriction. What this is

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Speaker 1: really going to do is get closer and closer to

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Speaker 1: Putin without being a direct attack on him. But what

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Speaker 1: they need to do is ultimately find assets of his

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Speaker 1: patriot compare Tree it's so to speak, that are in

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Speaker 1: the US that will really start to put some pressure

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Speaker 1: on them, waste the pressure on their access to capital markets.

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Speaker 1: Because Russia, the timing of this is just beautiful. They

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Speaker 1: come to market today with debt tom and the bids

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Speaker 1: are stacking up according to our report, and we've got

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Speaker 1: up to six point five billion dollars worth of bits

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Speaker 1: for this debt. There is appetite for Russian debt still

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Speaker 1: despite all of this political noise. Well and not just

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Speaker 1: political noise, but restrictions on the issuance of new debt

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Speaker 1: or equity from certain companies in Russia, which does complicate

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Speaker 1: matters for financial institutions trying to determine whether to take

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Speaker 1: positions or not. Four seventy five on eleven year notes

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Speaker 1: might get it done. Granted there is a yield there

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Speaker 1: for investors. I just think it will be surprising tom

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Speaker 1: for a lot of people that Russia still has this

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Speaker 1: access to capital markets within this is sanctions. What do

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Speaker 1: you expect in the next one week at p WC.

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Speaker 1: I don't really expect anything in the next week. I

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Speaker 1: think what you saw was what came out yesterday, and

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Speaker 1: again the administration is taking a fairly responsible app coach,

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Speaker 1: whether it's Russia or North Korea. With how they've been

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Speaker 1: ratcheting up the sanctions. I don't think they can do

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Speaker 1: anything else before the election. Eli Lake, who's always in

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Speaker 1: Cindy or we love having them on. Eli Lake of

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Speaker 1: Bloomberg View wrote a scathing piece of how the president

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Speaker 1: is to step up support Ambassador Haley's language. From where

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Speaker 1: you sit, granted distant from politics in finance, does Mr

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Speaker 1: Trump have to step in and support Prime Minister May.

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Speaker 1: He absolutely does. There needs to be a unilateral approach

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Speaker 1: to dealing with Russia, and that's what you saw with

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Speaker 1: the Obama administration and a number of allies around the

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Speaker 1: world with how the sectoral sanctions were rolled out a

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Speaker 1: few years ago. There can't be unilateral dealings with Russia

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Speaker 1: and sanctions at this point. It's dangerous for the message

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Speaker 1: with dealing with them. We think you so much for

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Speaker 1: coming in and we're very fortunate that you're here by

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Speaker 1: seven thirty this morning, because after seven thirty this morning,

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Speaker 1: we can have no one else on surveillance that supports Villanova. No,

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Speaker 1: no more Pennsylvania schools. Tony Dwyer is not read in

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Speaker 1: on Japanese domestic politics, but he has read in on optimism.

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Speaker 1: Tony with Kindergart January Jenuity, Tony gauge for us, the

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Speaker 1: level of your optimism right now, well, it's kind of

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Speaker 1: the same as it's been for the last nine years time.

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Speaker 1: It's pretty high. It's right now. It's pretty tough to

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Speaker 1: make the case that you're about to have this major decline.

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Speaker 1: We already had it. We had as you guys know,

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Speaker 1: and in mid January there was just a ridiculous level

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Speaker 1: of investor optimism coupled with zero fear of fat coming

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Speaker 1: off the two thousand seventeen move, and anytime that's happened

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Speaker 1: in the past, it's set the stage for a correction,

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Speaker 1: a temporary correction, and we had it. It was about

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Speaker 1: a twelve per cent, you know, Pika trough correction, that

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Speaker 1: kind of we're kind of recovering from that. That was

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Speaker 1: I call it a shock drop. But at the end

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Speaker 1: of the day, the fundamental backdrops are in pretty good shape.

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Speaker 1: You still have a positive yield curve, you still have

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Speaker 1: a strong learning for share outlook, and the global economy

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Speaker 1: remains pretty sound, albeit with a second derivative Sloan Tony.

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Speaker 1: You mentioned nine years, and a lot of people look

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Speaker 1: at that number and they say, well, it's been a

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Speaker 1: long long time. But when you look over the nine years,

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Speaker 1: we've had so much disruption in this ballmarket. We had

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Speaker 1: a Eurozone debt crisis, we had a tape of tantrum,

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Speaker 1: we had the jittis about China and the devaluation of

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Speaker 1: the one. More recently, we had a vol blow up.

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Speaker 1: It hasn't been smooth sailing, its salt has it? No

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Speaker 1: It hasn't it. It's sort of like Joe's And it's

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Speaker 1: a great point because people remember the nineties very differently

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Speaker 1: than I do. I remember six with a rational exuberance,

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Speaker 1: seven with the Asian economic crisis, with the Russian debt default,

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Speaker 1: monk capital in with only a few stacks going up.

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Speaker 1: But when when you read about it and think about it,

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Speaker 1: people like, oh, yeah, that it was this great easy pace,

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Speaker 1: that was the easy money. Right. This has not been

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Speaker 1: easy money this time either. It never is. And the

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Speaker 1: problem is price tends to whips of portfolio managers and

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Speaker 1: individual investors. In other words, when the market's going up,

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Speaker 1: you feel like it's going to go to a new

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Speaker 1: high in the next five minutes. And when it's going down,

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Speaker 1: oh my god, here's the big correction and it's all over.

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Speaker 1: And ultimately it's why it's so important for us to

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Speaker 1: maintain and and to sit down and say, okay, it's

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Speaker 1: the reason for a positive fundamental thesis. It always comes

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Speaker 1: down to earnings, and earnings continue to be higher as

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Speaker 1: long as the gil Curvis post Tony What does the

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Speaker 1: gloom crew get wrong? I mean, you know, I get

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Speaker 1: the numbers that came out with your report traffic stopped

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Speaker 1: on Fifth Avenue. I did the math eure open Europe.

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Speaker 1: From that moment, you're up for the year. It's a

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Speaker 1: double digit Tony Dwyer And there's a lot of people

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Speaker 1: that don't agree with you. What do they get wrong? Well, Tom,

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Speaker 1: the the title of our you Know Monthly picture book

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Speaker 1: is called evidence over Emotion for a reason. I think

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Speaker 1: people get very emotionally. They try to think it's different

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Speaker 1: this time. So, for example, it's interesting and you're a study.

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Speaker 1: You're a better study of the fact than I am.

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Speaker 1: But the San Francisco Fed just recently did a paper

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Speaker 1: that looked at the yield curve figuring out of it's

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Speaker 1: different this time or not. So they've looked at quantitative easing,

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Speaker 1: They've looked at all the factors that people think it's

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Speaker 1: different emotionally this cycle versus any other cycle. And you

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Speaker 1: know what they found. It's not different this time. It's

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Speaker 1: exactly the same as it is. So I think what

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Speaker 1: the bears get wrong the ultimately they're never wrong. When

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Speaker 1: the Yolker inverts it, it gets crushed. It's going to

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Speaker 1: get crushed as soon as the Feddan verts the yelker,

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Speaker 1: which they do every cycle. What they get wrong is

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Speaker 1: the timing of it. You've been on top off over

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Speaker 1: the last couple of months, and you've already been been

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Speaker 1: in the table about is that what matters here is

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Speaker 1: not the flatness of the curve, it's the inversion, and

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Speaker 1: that equities can continue to rally, continue to melt up

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Speaker 1: through a flattening curve. Is that the big point you're

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Speaker 1: trying to make, Tony, it is, Jonathan, And again I

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Speaker 1: really want to be clear on as people like me

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Speaker 1: when we say it. My opinion is you should ignore

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Speaker 1: ignore us. What I go by is what the evidence

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Speaker 1: suggests and history is telling us. It's commanding that the

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Speaker 1: market is going to go higher until it's proven differently,

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Speaker 1: which it hasn't over the last sixty years, until proven differently,

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Speaker 1: until the yield curve in birds credit accelerates even towards

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Speaker 1: the end of the cycle. So again, I think it's

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Speaker 1: so important that we forget about that work quote unquote

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Speaker 1: nine years into an economic recovery and look at what

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Speaker 1: is the driver of a change in the economic direction,

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Speaker 1: and it always is the vet inverting the curve. So

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Speaker 1: for the banks, and let's pick up on this point

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Speaker 1: there is a huge consensus by on the banks in

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Speaker 1: and you stand the banks can outperform as well despite

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Speaker 1: the shape of the yeld curve. Well, I think so.

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Speaker 1: And here's our our over the course of the last

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Speaker 1: two cycles, which is the only time you can find

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Speaker 1: the real consistent sector makeups that we had currently have.

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Speaker 1: So over the last two cycles, the productive quote unquote

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Speaker 1: productivity trade has worked well as the yield curve flattens

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Speaker 1: from the current degree to the inversion. So what what

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Speaker 1: what happens is I called the productivity trade Because if

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Speaker 1: you have inflationary fear, which is what drives the fet

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Speaker 1: raising interest rates, what's the offset to inflation, especially labor inflation.

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Speaker 1: It's got to be higher productivity for a company. So

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Speaker 1: who finances the productivity? Banks, financials, how do you implement it? Industrials?

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Speaker 1: Who's the technology behind the industrials? Obviously information technology. So

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Speaker 1: those are the three sectors that most consistently outperformed on

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Speaker 1: a long term basis. Tony does fiscal stimulus squared? I

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Speaker 1: guess give you pause. I mean, the fact is we're

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Speaker 1: gonna go into this and whether we get Trump GDP

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Speaker 1: or something south of that. The equity markets have to

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Speaker 1: deal with fiscal stimulus times too. So what do you do, well,

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Speaker 1: I think again, And what you do is you don't

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Speaker 1: change because it's different. This time we've had fiscal stimulus,

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Speaker 1: and prior cycles we've had fiscal what's the history of that,

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Speaker 1: what's the history when we get twin deficits. Twin deficits

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Speaker 1: don't matter. No, they don't matter until you invert the curve.

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Speaker 1: Think about this time. I I get that. I get

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Speaker 1: this question so often, as I'm sure you guys do

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Speaker 1: as well. Think about this, If the deficits mattered, how

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Speaker 1: the deficits have gone worse and worse and worse and

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Speaker 1: worse every year, the government debt to GDP worse and

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Speaker 1: worse and worse every year. Where bond yields and where

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Speaker 1: is the stock market bonields? Through the historic low? Stock

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Speaker 1: markets ad a historic high. So every time I read

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Speaker 1: somebody like me saying, oh my god, the debt is

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Speaker 1: going to come home to roost. Yeah, for this thirty years,

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Speaker 1: it's coming home to roost. And it isn't worm shutting

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Speaker 1: down credit. Your advice to retail investors is to just

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Speaker 1: switch off, have one shot on the computer of the

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Speaker 1: yield curve and just look at it every day and

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Speaker 1: until it inverts. Don't do think keep the bond equities

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Speaker 1: until past it inverts. Actually, we did a study in

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Speaker 1: our most recent pitchbook that found that the peak in

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Speaker 1: the market comes on media eighteen point five months following

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Speaker 1: um the curve inverting. So what I want to what

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Speaker 1: I want to point to is it it's not immediate.

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Speaker 1: So first of all, my advice to retail listeners is

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Speaker 1: don't trade off of people like me. Go by what

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Speaker 1: the history suggests, and the history suggested until the yeld

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Speaker 1: curven virtue. You don't need to get worried no matter

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Speaker 1: what you know you're gonna have nasty drops, but you

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Speaker 1: want to just stay the course. And also my second

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Speaker 1: thing to individual investors is pleased, Uh, you know, consult

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Speaker 1: with the professional versus listening guys like me doing it yourself.

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Speaker 1: Well that's good because that's what John Farrell did with

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Speaker 1: his bracket, Tony, He consulted with a professional. Is that

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Speaker 1: why you know what happens in these brackets, right, it's

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Speaker 1: usually the person that notes like me, that knows nothing

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Speaker 1: about college bath that ends up winning. Because we're not

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Speaker 1: trying to game it. Do you know what someone messaged

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Speaker 1: me about five minutes ago, You and Tom should have

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Speaker 1: your own sports show, The Tom and Jonathan Sports a

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Speaker 1: valiant show. And I just thought you you wouldn't know

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Speaker 1: what I'm talking about. I wouldn't know what you're talking about,

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Speaker 1: and we'd go for like sixty minutes and no one

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Speaker 1: Michael Michael burrd phone had just hit his microphone. Do

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Speaker 1: we need to crowd in on you? And Sasnik? You

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Speaker 1: just describe the business of sports? Can we can we

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Speaker 1: cover for you if you take some vacation Michael and

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Speaker 1: I do the show. Tony Dwyer, thank you so much,

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Speaker 1: greatly appreciate it. With can Achord Jenuity, where he is

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Speaker 1: an optimist, he has done the heavy lifting for me

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Speaker 1: and for Professor Irwin at Dartmouth College, which is to

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Speaker 1: talk about the linkage of the fiscal deficit with the

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Speaker 1: trade deficit. They've gone out and asked a bunch of

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Speaker 1: fancy people like Doug Irwin about it. And one of

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Speaker 1: the great things here Douglas Irwin is on the fear

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Speaker 1: of the twin deficit and the twin deficit hypothesis. There

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Speaker 1: is this word that I associate with Douglas North at

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Speaker 1: Washington University. Ambiguity. Boy, is this a squishy issue, isn't it? Well,

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Speaker 1: it is because it's not a one for one correlation

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Speaker 1: between the fiscal desk of the trade deficit. But there

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Speaker 1: is a relationship between them. Um. So we saw in

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Speaker 1: the late ninet nines, for example, when we were moving

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Speaker 1: towards a fiscal surplus, we also had a growing trade deficit.

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Speaker 1: So that doesn't really contradict the theory. It's as there

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Speaker 1: are other things going on. So it's the economist refuge

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Speaker 1: is always other things being equal. They're not always equal,

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Speaker 1: but other things being equal, larger fiscal deficity is associate

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Speaker 1: with a larger trade deficit. The President of the United

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Speaker 1: States doesn't have an ambiguity. He has a certitude that

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Speaker 1: a trade deficit is bad. Let's flip that on its head.

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Speaker 1: Can a trade deficit be good? Well? Can reflect the

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Speaker 1: certainly as strong and growing economy as it has in

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Speaker 1: the US of the past few decades. So when we've

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Speaker 1: done well as an economy, um, we're as we approach

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Speaker 1: full employment, people have higher incomes and we spend more

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Speaker 1: on imports and the trade desk. This tends to be larger.

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Speaker 1: And we saw during the financial crisis and the Great

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Speaker 1: Recession of thousand nine, the trade doesn't utterly collapsed so

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Speaker 1: by half, So that's not that's not good times. So

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Speaker 1: that's been the experience that we've seen in recent years.

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Speaker 1: This is really important, folks. I wouldn't normally do this

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Speaker 1: with a guy like Blanche Flower up at Hanover, but

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Speaker 1: I can do this with Doug Irwin. Let's go, let's

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Speaker 1: go partial differentials. Right now, American economy good, we buy BMWs, etcetera, etcetera.

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Speaker 1: Imports go up. All of my interviews say we've got

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Speaker 1: to boost exports, which is the the function that Washington

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Speaker 1: can influence, which is the function that the president can

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Speaker 1: influence with Trumpian policy. Is it better exports or to

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Speaker 1: diminish imports. Well, once again, these things are outside the

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Speaker 1: control of the White House directly, and but economic policy

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Speaker 1: does matter. So the value of the dollar is going

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Speaker 1: to affect our exports and imports. The state of the

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Speaker 1: business cycle and where the economy is, which the FETE

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Speaker 1: has a big impact on. That also affects the state

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Speaker 1: of our exports and imports, and the fiscal deficit. As

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Speaker 1: we've been talking about two that has an effect on

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Speaker 1: the relative balance between exports and imports. So the the

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Speaker 1: linkages are sort of indirect, but obviously the policy framework

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Speaker 1: matters a lot, and where the economy is that matters

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Speaker 1: a lot. If you're just joining us Douglas or of

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Speaker 1: Dartmouth College, the classic book Against the Tide can't say

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Speaker 1: enough about It's one of the few books folks I

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Speaker 1: give an aggressive reread too, as I read it cover

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Speaker 1: to cover two decades ago. In your index of Against

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Speaker 1: the Tide is John R. Hicks. He's the one who

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Speaker 1: took Kanes and said, there's is one line which is

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Speaker 1: a money line, and there's another line, which is the

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Speaker 1: real economy line. Everyone agrees that if we get tax

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Speaker 1: cuts and we get fiscal stimulus, the i s line,

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Speaker 1: the goods line shifts over in boom, We've got a

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Speaker 1: better economy, at least for the short term. Can you

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Speaker 1: link that, professor to dollar weakness? UM Usually think about

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Speaker 1: a fiscal expansion dollar strength because once again the economy

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Speaker 1: will be stronger, and because there'll be a pressure higher

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Speaker 1: investment demand UM possibly larger fiscal deficit, which will raise

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Speaker 1: interest rates, and that leads to a stronger dollar. So

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Speaker 1: once again, it's not necessarily always one for one that correlation,

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Speaker 1: but that's the way you usually think about it. And

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Speaker 1: yet my interviews are and the reason I brought the

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Speaker 1: question up, folks, and only got to get a perfect

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Speaker 1: discussion from Douglas Irwin, a perfect description rather, is what

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Speaker 1: we're seeing as a week dollar in the presumption of

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Speaker 1: further week dollar. How how does that cut? Why is

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Speaker 1: this time different? Well, remember, it's not just what's going

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Speaker 1: on in the US, but it's going what's going on

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Speaker 1: in the rest of the world. And I think Europe's

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Speaker 1: come back a bit. Asia is still very strong, um

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Speaker 1: so there's other sources of demand in the world. I

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Speaker 1: think the administration has also been sort of talking down

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Speaker 1: the dollar a little bit, and perhaps the interest rate

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Speaker 1: increases in the US have not been as rapid as

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Speaker 1: many expected. So always difficult to forecast the dollar, but

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Speaker 1: you can try to point to some of the factors

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Speaker 1: that might be behind it. Do we get a free

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Speaker 1: lunch because of senior? Do we get a free lunch

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Speaker 1: because we're the dominant currency? We do? And I know

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Speaker 1: you've had Barry iken Green on your program too, and

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Speaker 1: he's always invoked the French premier who said that there's

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Speaker 1: an exorbitant privilege. The US has an exorbitan and privilege

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Speaker 1: when it comes to the dollar. We really don't have to,

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Speaker 1: you know, worry about the financing of our external imbalances.

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Speaker 1: It sort of happens automatically. And uh, I mean that

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Speaker 1: there's a downside. There's an exorbit in burden some people

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Speaker 1: have pointed to is that the dollar is structurally overvalued

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Speaker 1: in the sense that there's this huge demand for this

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Speaker 1: safe NCY asset one of the tricks. So that's something

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Speaker 1: the Trump administration has to think about as well. Do

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Speaker 1: they want to undermine that? Um and uh and you know,

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Speaker 1: take the dollar away from being the world's reserve currency.

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Speaker 1: I want to in the final moments here, folks, with

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Speaker 1: Doug Irwin again, Folks, I'll put this out on Twitter.

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Speaker 1: I can't convey enough a careful reread against the ten.

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Speaker 1: I should point out that Professor Irwin has many other

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Speaker 1: efforts out more current in your index, and folks, you

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Speaker 1: can tell about an author in the index about where

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Speaker 1: he's focused. You are focused on Jacob Viner V I. N. E. R. Douggerwin.

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Speaker 1: Years ago. You gave a lot of square footage to

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Speaker 1: the professor from Chicago, who was Jacob Viner. Jacob Winner

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Speaker 1: was professor at the University of Chicago for many years

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Speaker 1: and then he ended his career at Princeton University UM.

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Speaker 1: And he was one of the great international economists of

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Speaker 1: the twentieth century and make great contributions not just to

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Speaker 1: how we think about trade theory and UH and UH

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Speaker 1: international economics, but you know, he talked about customs unions

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Speaker 1: and trade diversion and trade creation and create a lot

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Speaker 1: of concepts that were still in use today. And he

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Speaker 1: was definitive and mercantilism and our myths of that we

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Speaker 1: all have in our minds this word we learned and

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Speaker 1: forgot the bad things of evil mercantilism. When you hear

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Speaker 1: President Trump's rhetoric, does it get you back to that

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Speaker 1: classic Viner paper of the idea that we're becoming mercantilist America. Well,

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Speaker 1: it does in particular when you hear the presidents say

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Speaker 1: that trade wars are good and are easily one. UM.

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Speaker 1: You know, that's where the lessons of the past just

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Speaker 1: haven't sunk in in some sense, because we've been down

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Speaker 1: this road before. We've seen the script before and it

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Speaker 1: usually doesn't end up well for anyone. Um and I

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Speaker 1: think um uh. The European Union Commissioner said it. Well,

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Speaker 1: is that we can do stupid too, if you know,

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Speaker 1: we think create raising trade barriers is gonna be the way.

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Speaker 1: That's the heart of the matter. Here is the game theory.

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Speaker 1: And I've been twice this week already. You talk about

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Speaker 1: winder and Princeton folks, Avanage, Dixon, the art of strategy,

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Speaker 1: the art of game theory. I mean this White House,

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Speaker 1: let me rephrase that Ross Navarro is basically game theory

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Speaker 1: free right. Yeah, Well, it's hard to figure out exactly

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Speaker 1: what if there's something deeper than what they say, um,

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Speaker 1: you know once gonna They haven't revealed it, so maybe

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Speaker 1: there's some big design here, but it seems like it's

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Speaker 1: sort of increental measures without a big strategy and a

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Speaker 1: big think. I mean, once again, it was very impulsive

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Speaker 1: to pull out t p P without thinking through the

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Speaker 1: geopolitical and respect it's going to be fair. At the

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Speaker 1: President United States, both candidates wanted out of TPP because

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Speaker 1: that's the only way they could get elected, but he

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Speaker 1: also said that he wanted to renegotiate something bilateral with

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Speaker 1: all these partners. And the problem is that he's offended

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Speaker 1: so many of our trade partners that they don't want

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Speaker 1: to undertake bilateral negotiations. So you've sort of given up

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Speaker 1: something big um and not gotten anything to replace it.

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Speaker 1: This has been wonderful ago through and I know you've

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Speaker 1: been on the road traveling. Greatly appreciate your time this morning.

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Speaker 1: Douglas Irwine is at Dartmouth College holding court. There were

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Speaker 1: someone else, you know, folks on the show, David Blanchefower

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Speaker 1: among others as well. The book is Against the Tide

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Speaker 1: and intellectual history of free trade. There's no mathematics in it,

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Speaker 1: but I'm gonna tell you, folks, you don't breathe through it.

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Speaker 1: It's not a page turner. It is the definitive book

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Speaker 1: on how we got here in the intellectual struggle over

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Speaker 1: this strange concept that everybody's four, but everybody has trouble

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Speaker 1: explaining it as well. I can't say enough about truly

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Speaker 1: the classic, and it was instantly a classic against the tide.

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Speaker 1: Douglas Irwin fascination of course on CBS. You'll see it

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Speaker 1: Sunday morning, I know CBS, and we'll have it a

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Speaker 1: little bit after Facin Nation at nine am, and of

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Speaker 1: course we will have facin Nation for you two pm

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Speaker 1: on Bloomberg Radio as well. And joining us now Margaret Brennan,

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Speaker 1: who is the host of Facin Nation. Thrilled to have

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Speaker 1: her with us UH this morning. Margaret, you've been on

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Speaker 1: the watch at CBS with State for a number of years,

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Speaker 1: including your travels with John Kerry. How critical is it

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Speaker 1: that we have a Secretary of State designate and I'm

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Speaker 1: y right, Margaret, that the Pompeo exercise could go well

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Speaker 1: into August. Well, you know, that was one of the

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Speaker 1: questions Tom that I put to Senator Bob Corker was

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Speaker 1: going to be one of my guests on Sunday UM

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Speaker 1: because he has to oversee these hearings, confirmation hearings from

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Speaker 1: Mike Pompeo. He won't be pinned down on exactly when

429
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Speaker 1: Mike Pompeo will be in that post April, mid April

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Speaker 1: through the earliest we're hearing he could even begin those

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Speaker 1: those hearings. And there is a real need to have

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Speaker 1: a confirmed Secretary of State in that spot because there

433
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Speaker 1: are umber of things happening in May that around nuclear

434
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Speaker 1: deal decisions, stay or go. North Korea talks a number

435
00:24:06,560 --> 00:24:09,359
Speaker 1: of big pressing issues, and right now you have the

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Speaker 1: President looking at shaking up further his national security teams.

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Speaker 1: So there's real concern. We have people we talked to

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Speaker 1: Richard Host, counsel on Foreign Relations, Nick Brady, of course

439
00:24:19,200 --> 00:24:23,280
Speaker 1: with his service to Republican administrations, who are looking into

440
00:24:23,320 --> 00:24:26,560
Speaker 1: the State Department, but they really don't know. You've been

441
00:24:26,640 --> 00:24:31,720
Speaker 1: following states through the emptying of that feigned building. How

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00:24:31,840 --> 00:24:36,960
Speaker 1: empty will be Secretary Pompeo State Department. Well, there's a

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00:24:37,080 --> 00:24:40,480
Speaker 1: hope that because Mike Pompeo has a good personal relationship

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00:24:40,480 --> 00:24:43,199
Speaker 1: with the President, that he can kind of unstick some

445
00:24:43,400 --> 00:24:47,119
Speaker 1: of those um bottlenecks that have been there with you know,

446
00:24:47,119 --> 00:24:49,560
Speaker 1: Rex Tillerson had all these choices for people he wanted

447
00:24:49,600 --> 00:24:51,880
Speaker 1: to put into spots and they couldn't get White House approval.

448
00:24:52,200 --> 00:24:55,080
Speaker 1: But then there's also the problems of you know, Congress

449
00:24:55,160 --> 00:24:58,120
Speaker 1: is backlogs, there has been some obstruction, you know, objecting

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Speaker 1: to some of the President's nominees, all the worker bees

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00:25:01,800 --> 00:25:04,879
Speaker 1: at that mid level that follow and carry out the

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00:25:04,880 --> 00:25:09,479
Speaker 1: president's policy. There are real problems with vacancies at the

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00:25:09,520 --> 00:25:12,480
Speaker 1: State Department That's also why when you have seen these

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Speaker 1: exits from high profile people like our North Korea envoy

455
00:25:16,800 --> 00:25:20,680
Speaker 1: who quit last month, it is a real concern because

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00:25:20,760 --> 00:25:23,960
Speaker 1: you basically have the generals on the foreign policy front

457
00:25:24,119 --> 00:25:26,439
Speaker 1: exiting and you don't have that middle management. So the

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00:25:26,440 --> 00:25:29,560
Speaker 1: hope is my Pompeo can get someone in there. But uh,

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00:25:29,680 --> 00:25:31,600
Speaker 1: it's not clear what he's going to be like as

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00:25:31,600 --> 00:25:34,679
Speaker 1: a policymaker. He's been on that analyst side, a CIA director.

461
00:25:34,800 --> 00:25:37,240
Speaker 1: You bring up the general's break some news with Bloomberg

462
00:25:37,320 --> 00:25:41,320
Speaker 1: Radio Margaret instead of CBS this morning with her General McMaster.

463
00:25:41,440 --> 00:25:45,040
Speaker 1: You've got the inside story. What's what I'm my head spinning?

464
00:25:45,080 --> 00:25:48,359
Speaker 1: After the Wall Street Journal, the Washington Post, the Press

465
00:25:48,400 --> 00:25:51,840
Speaker 1: secretary comes out what is actually the reality at nine

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Speaker 1: oh five am. Well, look, the President has been advised

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Speaker 1: if you're gonna further shake up your national security team,

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00:25:58,920 --> 00:26:01,640
Speaker 1: get it all done in one eek. Uh use Rex

469
00:26:01,680 --> 00:26:05,280
Speaker 1: Tillerson's oustir as a chance to sort of hit reset.

470
00:26:05,480 --> 00:26:07,639
Speaker 1: So if you want to shake it up, do it

471
00:26:07,720 --> 00:26:11,120
Speaker 1: by Friday. The President doesn't always sool the advice he's given.

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00:26:11,200 --> 00:26:13,600
Speaker 1: It's not clear that he's going to act on that.

473
00:26:13,680 --> 00:26:17,120
Speaker 1: But I have to say, ah R McMaster has taken

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Speaker 1: a lot of heat since he took this job. I mean,

475
00:26:19,480 --> 00:26:23,040
Speaker 1: he is perpetually rumored to be departing. It sounds like

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00:26:23,080 --> 00:26:26,040
Speaker 1: this is reaching a fevered pitch at this point. He's

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00:26:26,160 --> 00:26:29,200
Speaker 1: been on the opposite end of our arguments with Rex

478
00:26:29,240 --> 00:26:31,760
Speaker 1: Tillerson Jim Mattis, who were kind of a united front.

479
00:26:32,240 --> 00:26:35,960
Speaker 1: Does that mean he's strengthened now because of Recoglition's departure,

480
00:26:36,000 --> 00:26:39,200
Speaker 1: or does that mean he's imperil. It sounds like the

481
00:26:39,240 --> 00:26:41,959
Speaker 1: exit ramp is there. They're looking at jobs for him,

482
00:26:42,119 --> 00:26:44,920
Speaker 1: possibly on the Korean Peninsula, to take a fourth star

483
00:26:44,960 --> 00:26:47,360
Speaker 1: and maybe go into a command role there, but it's

484
00:26:47,359 --> 00:26:50,159
Speaker 1: not clear when that may happen. I've been bringing my

485
00:26:50,240 --> 00:26:54,480
Speaker 1: colleague Margaret, just wondering in the context of your conversation

486
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Speaker 1: with Senator cork or whether the appointment, of course of

487
00:26:57,160 --> 00:27:00,360
Speaker 1: Mike Pompeo to lead the State Department, whether that will

488
00:27:00,880 --> 00:27:04,880
Speaker 1: uh sort of open up the conversation about Iran and

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00:27:05,200 --> 00:27:08,560
Speaker 1: nuclear weapons, in particularly in light of Saudi Arabias saying

490
00:27:08,600 --> 00:27:12,080
Speaker 1: that they would develop nuclear weapons if around does the same. Oh,

491
00:27:12,160 --> 00:27:14,880
Speaker 1: this is a decision that's going to have huge implications

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00:27:14,880 --> 00:27:16,679
Speaker 1: not just for the oil markets, but just for like

493
00:27:16,840 --> 00:27:20,320
Speaker 1: US policy and the world. May twelve, that's the day

494
00:27:20,359 --> 00:27:22,159
Speaker 1: to put on your calendar with the President to make

495
00:27:22,160 --> 00:27:25,159
Speaker 1: a decision on whether to continue to wave sanctions on Iran.

496
00:27:25,480 --> 00:27:27,600
Speaker 1: Mike Pompeyo is a huge skeptic of the Iran deal

497
00:27:27,600 --> 00:27:30,040
Speaker 1: when he was in Congress. Does this perspective change when

498
00:27:30,040 --> 00:27:33,080
Speaker 1: he becomes Secretary of State. We don't know yet, but

499
00:27:33,240 --> 00:27:37,200
Speaker 1: it looks like, according to Bob Corker, uh, this president

500
00:27:37,280 --> 00:27:39,760
Speaker 1: is going to pull us out of that international accord,

501
00:27:39,840 --> 00:27:42,240
Speaker 1: and that is going to have huge ramifications. You have

502
00:27:42,280 --> 00:27:46,399
Speaker 1: a number of flashpoints in May potentially with Iran. That's

503
00:27:46,480 --> 00:27:49,600
Speaker 1: just one of them. Uh. And it is a huge

504
00:27:49,880 --> 00:27:52,520
Speaker 1: question mark if you get out of an international agreement

505
00:27:52,520 --> 00:27:56,359
Speaker 1: to freeze Iran's nuclear program, which isn't anywhere near as

506
00:27:56,400 --> 00:28:00,800
Speaker 1: developed as North Korea's existing weapons program, what is that boat?

507
00:28:00,880 --> 00:28:03,679
Speaker 1: Does Kim Jong un just say my deal stands alone,

508
00:28:03,800 --> 00:28:06,840
Speaker 1: or does he say, wait, you know this, this accord

509
00:28:06,960 --> 00:28:09,960
Speaker 1: was broken. Why should I agree to give you anything.

510
00:28:10,400 --> 00:28:12,879
Speaker 1: It's a question Bob Corker and other skeptics have have

511
00:28:13,000 --> 00:28:15,720
Speaker 1: raised here saying, look, we may not love the Iran deal,

512
00:28:16,160 --> 00:28:18,880
Speaker 1: but don't just throw the baby out with the bathwater here,

513
00:28:18,960 --> 00:28:21,679
Speaker 1: Let's improve it. You mentioned North Korea, and I'm wondering

514
00:28:21,680 --> 00:28:24,080
Speaker 1: whether that is a topic for Senator Corker as well.

515
00:28:24,119 --> 00:28:27,720
Speaker 1: North Korea is sharing their nuclear knowledge with Iran, and

516
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Speaker 1: whether any kind of rap for schmall between the United

517
00:28:31,240 --> 00:28:34,560
Speaker 1: States and North Korea will have an effect on that. Well,

518
00:28:34,600 --> 00:28:37,800
Speaker 1: we have South Korea's chief diplomat, their foreign minister is

519
00:28:37,800 --> 00:28:40,160
Speaker 1: going to be on the show with me on Sunday. Uh.

520
00:28:40,320 --> 00:28:42,480
Speaker 1: She flew here to meet with Rex Tillerson and then

521
00:28:42,520 --> 00:28:47,360
Speaker 1: said do I still come to Washington? Um? And and

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00:28:47,720 --> 00:28:49,400
Speaker 1: she's still going to State Department to have some of

523
00:28:49,400 --> 00:28:51,840
Speaker 1: those meetings and talk about why is there there's been

524
00:28:51,880 --> 00:28:54,640
Speaker 1: absolute silence nor Kim Jong un hasn't said whether he

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00:28:54,760 --> 00:28:56,760
Speaker 1: does plan to meet with the president or not. Remember,

526
00:28:57,320 --> 00:29:01,040
Speaker 1: he kind of didn't reply to the President's public acceptance.

527
00:29:01,360 --> 00:29:03,760
Speaker 1: So we want to see what's happened happening with that

528
00:29:03,960 --> 00:29:05,960
Speaker 1: on the diplomatic front. Who else do you have on

529
00:29:06,000 --> 00:29:09,160
Speaker 1: this show this Sunday, Margaret Brennan. We also have an

530
00:29:09,160 --> 00:29:12,520
Speaker 1: independent voice, a Senator Angus King of Mane will be

531
00:29:12,600 --> 00:29:16,000
Speaker 1: joining us, and Rand Paul of Kentucky who has already

532
00:29:16,000 --> 00:29:19,080
Speaker 1: said he's opposed to the UH nominee to be the

533
00:29:19,120 --> 00:29:22,400
Speaker 1: new secretary and the nominee to be the CIA director. Margaret,

534
00:29:22,440 --> 00:29:28,120
Speaker 1: I don't care. Can Virginia get by Kentucky Wall who

535
00:29:28,560 --> 00:29:31,320
Speaker 1: don't bet against Virginia, Margaret Brennan, thank you so much.

536
00:29:31,320 --> 00:29:34,040
Speaker 1: With facin Nation, of course, out of U v A

537
00:29:34,600 --> 00:29:38,120
Speaker 1: UH as well. Of course you can see facin Nation

538
00:29:38,200 --> 00:29:40,480
Speaker 1: on CDs and CBS N. They do that at nine

539
00:29:40,440 --> 00:29:43,120
Speaker 1: a m. Sunday morning here at I'm Bloomberg Radio two pm.

540
00:29:43,400 --> 00:29:56,120
Speaker 1: I love it for you. Sunday afternoon is up. Thanks

541
00:29:56,160 --> 00:30:00,440
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

542
00:30:00,640 --> 00:30:05,960
Speaker 1: to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform

543
00:30:06,080 --> 00:30:10,360
Speaker 1: you prefer. I'm on Twitter at Tom Keane before the podcast.

544
00:30:10,440 --> 00:30:13,920
Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio