WEBVTT - Former CIA Ops Chief: In the Long Game, Maduro Goes 0:00:02.640 --> 0:00:05.600 Welcome to the Bloomberg Penel Podcast. I'm Paul Sweeney. Along 0:00:05.600 --> 0:00:07.760 with my co host Lisa Brahma Waits. Each day we 0:00:07.880 --> 0:00:10.399 bring you the most noteworthy and useful interviews for you 0:00:10.520 --> 0:00:12.640 and your money. Whether at the grocery store or the 0:00:12.640 --> 0:00:15.960 trading floor, find a Bloomberg penl podcast on Apple podcast 0:00:16.120 --> 0:00:18.040 or wherever you listen to podcasts, as well as at 0:00:18.079 --> 0:00:23.920 Bloomberg dot com. It's hard to pinpoint the biggest hot 0:00:23.960 --> 0:00:27.440 spot that we ought to be paying attention to, Paul Sweeney. Luckily, 0:00:27.480 --> 0:00:30.000 we have Jack Divine here to go through them all 0:00:30.000 --> 0:00:32.400 with us. He is the founding partner and president of 0:00:32.440 --> 0:00:35.960 the ark And Group, also former chief of the CIA's 0:00:36.040 --> 0:00:39.400 worldwide operations, joining us here in our Bloomberg Adder Active 0:00:39.440 --> 0:00:42.519 Broker's studios. Jack, we love having you. Thank you for 0:00:42.640 --> 0:00:45.600 being here. I want to start with Venezuela because a 0:00:45.720 --> 0:00:48.560 lot of people are pinpointing the fact that it's become 0:00:48.800 --> 0:00:52.240 sort of a proxy location for a battle for supremacy 0:00:52.360 --> 0:00:55.800 between Russia and China on one hand and the US 0:00:55.960 --> 0:00:58.800 on the other. And I'm wondering, from your perspective, how 0:00:59.000 --> 0:01:02.640 valid is it to view the conflict in Venezuela currently 0:01:03.000 --> 0:01:06.080 through that lens at Lisa. As you know, I'm a 0:01:06.160 --> 0:01:09.320 Cold warrior, unreformed if you will, and if you if 0:01:09.400 --> 0:01:12.160 you stay in a game long enough, it repeats itself. 0:01:12.319 --> 0:01:14.720 So when I look at Venezuela to day with my 0:01:14.880 --> 0:01:17.760 background having spent so many years in the struggle with 0:01:18.880 --> 0:01:21.200 the Russians and the Cubans, I mean, this is a 0:01:21.360 --> 0:01:24.840 very familiar pattern. And they see a vulnerability on our 0:01:24.920 --> 0:01:27.959 flank and in our sphere of influence, and they push 0:01:28.040 --> 0:01:31.559 it for maxim advantage. Now, I think most Americans haven't 0:01:31.600 --> 0:01:34.680 been following over the past several years just how important 0:01:35.240 --> 0:01:40.360 Russia's financial support has been to Venezuela. And on again 0:01:40.400 --> 0:01:42.800 the professional side, the part that I'm quite familiar with, 0:01:43.160 --> 0:01:46.680 having supported the Cuban intelligence group and being able to 0:01:46.800 --> 0:01:52.000 monitor the opposition and how to counteract. It's very reminiscent 0:01:52.040 --> 0:01:55.360 of the Cold War. Having said that, the second part 0:01:55.400 --> 0:01:59.840 of that play is we have always resisted uh those 0:02:00.760 --> 0:02:04.720 adventures into this hemisphere, and I the strong action of 0:02:04.800 --> 0:02:10.600 sanctioning Venezuela is all part of this bigger chess chess game, 0:02:10.720 --> 0:02:14.240 and I do think we have to keep rushing Cuba 0:02:15.120 --> 0:02:18.240 from gaining another foothold in the region. So, Jack, given 0:02:18.280 --> 0:02:22.160 your long experience in that region of the world, what 0:02:22.360 --> 0:02:24.799 is your sense of how this plays out? It seems 0:02:24.840 --> 0:02:28.320 like when the um there's a lot of support for 0:02:28.720 --> 0:02:30.560 we have two presidents now, I mean, I guess my 0:02:30.600 --> 0:02:32.280 sentence is very quickly. How do you think this will 0:02:32.280 --> 0:02:36.840 play out? I think it's a very complicated situation. We 0:02:37.080 --> 0:02:42.960 tend to underestimate how far a country has to fall 0:02:43.720 --> 0:02:49.079 before there's an eruption of of a regime change. So 0:02:49.600 --> 0:02:52.079 when you look at the dynamic, I mean the inflation 0:02:52.240 --> 0:02:56.600 and UH in Venezuela, the shortages it is the lack 0:02:56.760 --> 0:03:00.600 of UH sufficient protection for the city, a sence, the 0:03:01.120 --> 0:03:05.760 autocratic nature of of the Madero government. They're at a 0:03:05.919 --> 0:03:10.079 very low point UH in the process. That doesn't mean 0:03:10.520 --> 0:03:12.800 that it's going to be resolved quickly. Actually was reading 0:03:12.800 --> 0:03:15.160 an article today in which one of the opposition leaders 0:03:15.200 --> 0:03:18.000 had one of our vulnerabilities here, if we think that 0:03:18.120 --> 0:03:21.600 this is a short game, we're probably gonna be you know, 0:03:21.600 --> 0:03:24.360 we're gonna dissipate our energy. So this is a sustained, 0:03:24.600 --> 0:03:27.840 sustained effort. I don't think it's over anytime soon. And 0:03:27.919 --> 0:03:30.520 as you know, the key, or at least many analysts 0:03:30.560 --> 0:03:33.000 would say the key is where does the military come down? 0:03:33.760 --> 0:03:37.640 But the military is not a united, monolithic group. You 0:03:37.720 --> 0:03:41.360 have military leadership and then you have the private and 0:03:41.520 --> 0:03:45.840 sergeant that's living with inflation shortages and his family. So 0:03:46.240 --> 0:03:48.840 the military doesn't have a lock on it. And the 0:03:49.000 --> 0:03:53.320 question is at what point in this process does the 0:03:53.440 --> 0:03:56.200 system break? And it is uh. I always say it's 0:03:56.200 --> 0:03:58.200 a game of chicken that the manages it, but there 0:03:58.360 --> 0:04:01.960 is this is going to be a move and counter move. 0:04:02.040 --> 0:04:04.720 I think for some period of time over the long 0:04:04.800 --> 0:04:09.040 play Madero goes not sustainable. I want to I want 0:04:09.080 --> 0:04:10.720 to shift gears a little bit. The way that we 0:04:10.920 --> 0:04:14.240 get a sense of how to engage most effectively is 0:04:14.360 --> 0:04:18.360 through our intelligence operations, both in Venezuela and elsewhere in 0:04:18.400 --> 0:04:20.480 the world. And I want to just check in with 0:04:20.640 --> 0:04:23.280 you about something that we've talked about over the over 0:04:23.320 --> 0:04:26.520 the past few years, which is morale at the CIA 0:04:26.920 --> 0:04:29.479 right now, Given the fact that we still are getting 0:04:29.560 --> 0:04:33.000 leeks about things out of the CIA and the fact 0:04:33.080 --> 0:04:38.360 that there does seem to be some dissonance disagreements within 0:04:38.640 --> 0:04:41.279 the administration right now, can you give us a read 0:04:41.320 --> 0:04:45.600 how are things just internally. My experience in the agency 0:04:45.920 --> 0:04:51.000 is that morale is often directly correlated to how important 0:04:51.320 --> 0:04:54.320 the agency is in the scheme of things in our 0:04:54.440 --> 0:04:59.880 policy and how much is an administration using the CIA 0:05:00.120 --> 0:05:03.840 that is really the ingredient. As a population has probably 0:05:03.960 --> 0:05:09.919 split fifty two Republican Democrats, switching is part of America, 0:05:10.080 --> 0:05:14.240 So it's not so politicized in that regard today, whether 0:05:14.279 --> 0:05:17.080 you have a Republican president or a Democratic president. The 0:05:17.200 --> 0:05:20.560 CIA is a really critical piece of the action. So 0:05:20.760 --> 0:05:25.880 I at the working level as opposed to uh, we're 0:05:25.880 --> 0:05:29.080 seeing it played out some policy level disputes, but the 0:05:29.320 --> 0:05:32.840 rank and file is more interested in doing doing the job. 0:05:33.520 --> 0:05:37.359 Now At the policy level, UM, I mean the mission 0:05:37.400 --> 0:05:40.440 of the CIA engraved on its wall, and we've talked 0:05:40.480 --> 0:05:43.159 about this before. Its product is just tell the facts 0:05:43.200 --> 0:05:45.200 the way they are, and when it gets in trouble, 0:05:45.480 --> 0:05:49.600 it deviates from that. So policymakers need to understand that 0:05:49.760 --> 0:05:52.760 and live with it. And the best ones understand that 0:05:52.880 --> 0:05:56.440 that is a strength. And so I think, um, looking 0:05:56.520 --> 0:06:00.920 at the situation today, UM, I think, um, you know 0:06:00.960 --> 0:06:02.840 everyone's looking that there will be a fight between the 0:06:02.880 --> 0:06:06.720 intelligence community and policy makers. I think that's not good 0:06:06.800 --> 0:06:11.560 for this country. UM And, I think over time, good 0:06:11.640 --> 0:06:16.120 objective intelligence prevails and most presidents events eventually succumbed to 0:06:16.160 --> 0:06:19.560 the to the importance of relying on it. So, how 0:06:19.720 --> 0:06:23.200 the so you're saying that the UM some the commentary 0:06:23.279 --> 0:06:27.359 from President Trump at administration detigrating UH the intelligence agencies. 0:06:27.400 --> 0:06:30.760 You're thinking your senses that these agencies can withstand that 0:06:30.920 --> 0:06:33.000 certainly in the near term, focus on the long term. 0:06:34.400 --> 0:06:36.280 You know, I may be an optimist, but my experience 0:06:36.400 --> 0:06:40.000 leads me to believe the truth does prevail, that reason 0:06:40.080 --> 0:06:43.800 does prevail. UM And I think when you look at 0:06:43.839 --> 0:06:46.640 the assessments, you know, there's things that are said in 0:06:46.720 --> 0:06:49.279 the public forms, other things were said in the back room. 0:06:49.800 --> 0:06:53.200 I don't think the intelligence being shocked. I know. Let 0:06:53.240 --> 0:06:58.280 me differently, I know the intelligence community really considers Iran 0:06:58.360 --> 0:07:01.080 and evil empire. Right. It's you know, my career, I 0:07:01.200 --> 0:07:03.880 was in charge of Iranian operations at one point. There's 0:07:03.920 --> 0:07:07.960 no school of thought inside the agency that Iran is 0:07:08.000 --> 0:07:11.320 a good nation and the part of the brotherhood U. So, 0:07:12.080 --> 0:07:15.160 I think the dispute is whether or not the specific 0:07:15.720 --> 0:07:20.880 ingredients of the UH of the treaty worked out with 0:07:21.000 --> 0:07:26.320 them on nuclear uh development is being adhere to, and 0:07:26.520 --> 0:07:31.200 I think the senses it is they would point out 0:07:32.080 --> 0:07:34.840 if pressed, and I believe it's probably even in the 0:07:34.920 --> 0:07:39.080 record that you know, this is not an ironclad agreement, 0:07:39.280 --> 0:07:42.920 the nuclear agreement, so there is room for developing missiles. 0:07:43.040 --> 0:07:47.320 There's sights that can't be worked, so it's it's not 0:07:47.480 --> 0:07:51.200 as clean as may be portrayed publicly. So I think 0:07:51.240 --> 0:07:53.400 the sea is very much awared about all of these 0:07:53.440 --> 0:07:55.960 things and understand the motivations. But if you look at 0:07:56.000 --> 0:07:59.680 the technical point A, point B, they haven't broken it. 0:08:00.280 --> 0:08:02.400 Chack Devine, we love having you on. Thank you so 0:08:02.480 --> 0:08:04.560 much for being with us. Jack Devine, founding partner and 0:08:04.600 --> 0:08:07.640 president of the ark And Group, also former chief of 0:08:07.720 --> 0:08:12.840 CIA's Worldwide Operations author of Good Hunting, A Spy Master's Story. 0:08:13.520 --> 0:08:16.640 Really interesting to get this perspective because the intelligence community 0:08:16.960 --> 0:08:20.680 is so pivotal in national security and has been under 0:08:21.120 --> 0:08:38.320 under a lot of scrutiny of late. The US retail 0:08:38.320 --> 0:08:42.079 industry continues to undergo tremendous disruption brought about by e 0:08:42.240 --> 0:08:45.880 commerce writ large and perhaps Amazon dot Com in particular, 0:08:46.240 --> 0:08:49.280 and no US name has been more impacted, arguably than Sears, 0:08:49.440 --> 0:08:52.600 the venerable Sears Brandon the United States to help us 0:08:52.679 --> 0:08:55.280 kind of passed through what is going on in retail 0:08:55.360 --> 0:08:57.640 these days, particularly with Sears. There's been some more news. 0:08:57.720 --> 0:09:01.400 There's Bert Flickinger. Burg is a manager director at Strategic 0:09:01.559 --> 0:09:05.640 Resource Group. Bert joins us in our Bloomberg Interactive Broker studio. Bert. 0:09:05.679 --> 0:09:07.160 We love to have you here. Thank you very much. 0:09:07.720 --> 0:09:09.640 Can you give us the latest on what is going 0:09:09.760 --> 0:09:13.080 on at Sears? It looks like Eddie Lambert one another 0:09:13.440 --> 0:09:17.000 round of to keep this company afloat. My question to 0:09:17.080 --> 0:09:20.080 you is what is going on? What's the latest Paul 0:09:20.160 --> 0:09:25.240 and Lisa. Another really regrettable example of bankruptcy Judge Bob 0:09:25.360 --> 0:09:29.679 drain who was a big Wall Street partner let letting 0:09:30.040 --> 0:09:35.599 Lampert's lawyers, who making thousands of dollars per hour, just 0:09:35.840 --> 0:09:38.200 run rough shot. In my professional view, with a lot 0:09:38.240 --> 0:09:41.120 of experience in this area, run rough shot over the 0:09:41.240 --> 0:09:46.599 creditors Um, including the vendors, the workers, the landlords, and 0:09:47.400 --> 0:09:53.920 Lampert is epitomized retail and aptitude throughout his career, and 0:09:54.240 --> 0:09:58.640 and for drain Um to not have the right person 0:09:59.640 --> 0:10:03.800 with Lampert, with his advisers, with the law firm wild 0:10:03.840 --> 0:10:07.120 gotchall without the right skills. How to you know? It's 0:10:07.200 --> 0:10:10.840 an institutionally an excuseable view. So Sears has been an 0:10:10.880 --> 0:10:14.120 absolute mess for a while, and certainly that's been reflected 0:10:14.160 --> 0:10:16.559 in the fact that the shares are trading under a 0:10:16.600 --> 0:10:20.080 dollar until very recently they've surged. They've actually almost doubled 0:10:20.120 --> 0:10:23.120 from sixty cents to a dollar in the past two sessions. 0:10:23.160 --> 0:10:25.559 But I'm just wondering what could Sears do at this 0:10:25.840 --> 0:10:32.240 point to rejuvenate itself, Lisa key question you're asking, And 0:10:32.400 --> 0:10:35.679 here's where Lampert fails to have a good grasp for 0:10:35.720 --> 0:10:38.920 the obvious. He had e commerce right in front of him. 0:10:39.120 --> 0:10:42.199 As you've presently pointed out a number of times, the 0:10:42.280 --> 0:10:45.160 Sears catalog couldn't have been converted to e retail to 0:10:45.240 --> 0:10:48.800 compete with Amazon, but it could have been effective. Kurt Avalon, 0:10:49.120 --> 0:10:52.360 who was one of the founders of Takeoff e Retail, 0:10:52.800 --> 0:10:57.240 was the chief merchant for Lampert. Uh Lampert let him 0:10:57.320 --> 0:11:03.920 leave the company. Avalon's done ninety e retail micro fulfillment 0:11:04.000 --> 0:11:07.880 centers were body sized, mechanized eight thousand square feet, can 0:11:07.920 --> 0:11:10.400 do a million a week. That would have saved Sears. 0:11:10.760 --> 0:11:14.360 The guys sitting in the executive suite with Lambert, and 0:11:14.600 --> 0:11:18.040 Lambert doesn't want to invest in sales circulars, doesn't want 0:11:18.080 --> 0:11:21.800 to rental, and Revinal the store raises prices with impunity, 0:11:22.200 --> 0:11:25.920 sees the solution to save the company, lets it go. 0:11:26.440 --> 0:11:29.480 What do we do here? We bring back Bob Mettler, 0:11:29.679 --> 0:11:33.439 Arthur Martinez, the dream team that saves Sears twenty years ago, 0:11:33.960 --> 0:11:37.880 and the boards Tip two is to do it and Lambert, 0:11:37.920 --> 0:11:40.360 in my views, has has too much ego to do it. 0:11:40.679 --> 0:11:43.040 And the American taxpayers are going to pay a very 0:11:43.120 --> 0:11:46.440 painful price for this one. So is Lambert's play here, 0:11:46.600 --> 0:11:49.439 in your opinions, simply a real estate play of the 0:11:49.559 --> 0:11:51.520 stores and so on and so forth. I just don't 0:11:51.520 --> 0:11:55.040 see away how he recovers anything remotely close to what 0:11:55.120 --> 0:11:59.560 he I'm sure originally planned. Polish is you referenced, well, 0:12:00.080 --> 0:12:02.360 it was a real estate play to start with Marty 0:12:02.400 --> 0:12:06.360 Whitman when they controlled Kmart almost twenty years ago. In 0:12:06.440 --> 0:12:10.560 that bankruptcy combined with Sears real estate play and huge 0:12:10.679 --> 0:12:13.720 fees to Lampard and his company in addition to him 0:12:13.800 --> 0:12:19.319 demification for him not to have litigation liability, and in 0:12:19.440 --> 0:12:23.960 my view, he should be investigated and if investigated, pay 0:12:24.000 --> 0:12:28.160 the commercial consequences. So that sort of takes us to 0:12:28.240 --> 0:12:31.280 the whole concept of shopping malls and the role of 0:12:31.360 --> 0:12:34.439 them going forward. And honestly, this was called into relief 0:12:34.520 --> 0:12:37.080 by j Z Penney, which decided to stop selling major 0:12:37.120 --> 0:12:40.360 appliances as well as furniture in some US stores this week. 0:12:40.400 --> 0:12:43.679 As Bloomberg News reported yesterday, I'm just wondering, you know, 0:12:43.800 --> 0:12:46.360 what will be the role of shopping malls, just how 0:12:46.480 --> 0:12:49.920 much of the carnage has already happened versus needs to happen, 0:12:51.160 --> 0:12:54.679 Lee Lisa, what's happening in the US will be much 0:12:54.760 --> 0:12:59.079 worse than what's happening overseas. And our worldwide work for 0:12:59.320 --> 0:13:03.280 arbitration tribunals Paris, Dubai, we had to do a worldwide 0:13:03.360 --> 0:13:07.520 study of research luxury to mid mid tier to downstream 0:13:07.720 --> 0:13:11.319 and what we see in London is Selfridge's store the 0:13:11.400 --> 0:13:15.600 year three years ago in a row. Harvey Nichols digit 0:13:15.880 --> 0:13:19.120 digitized the experience, so they get young consumers. It's almost 0:13:19.160 --> 0:13:22.120 like going to a Disney property and they get all 0:13:22.200 --> 0:13:25.680 kinds of graphics one would see on her his mobile phone. 0:13:26.080 --> 0:13:30.720 What the Parisian retailers do when Bloomberg is not correctly 0:13:30.840 --> 0:13:35.679 reporting the yellow vests um rioting in the streets. The 0:13:35.840 --> 0:13:40.079 retailers in South Korea, Japan here know how to evolve 0:13:40.160 --> 0:13:44.120 with the future investing malls to make them exciting. Here. Uh, 0:13:44.280 --> 0:13:48.440 they're they're dead elephants, just waiting to be restructured by 0:13:48.559 --> 0:13:51.320 private equity firms. Some of the private equity firms are 0:13:51.400 --> 0:13:54.679 good in our view. I don't think uh Lambert's private 0:13:54.720 --> 0:13:57.880 equity firm in anybody's view, is constructive. So you still 0:13:58.000 --> 0:14:01.400 think that there is a role for bricks and mortar retail, 0:14:01.840 --> 0:14:03.760 but is your view that has to be much more 0:14:04.360 --> 0:14:07.600 closely tied in and aligned with the digital e commerce offering. 0:14:07.800 --> 0:14:10.960 That is that the life the life raft for bricks 0:14:10.960 --> 0:14:13.880 and mortar exactly as you stated, Paul. And here's the 0:14:13.960 --> 0:14:18.600 example Sears four in Hamburg, where the Buffalo bills played 0:14:18.679 --> 0:14:21.880 close to the Canadian border. Like all the Sears Canadian 0:14:21.920 --> 0:14:24.160 border stores should be doing lots of business. It's not. 0:14:24.600 --> 0:14:28.080 But Amazon moved in to Niagara Falls Boulevard with a 0:14:28.160 --> 0:14:31.920 combination Amazon Whole Food Store where they blew up the 0:14:32.040 --> 0:14:36.960 whole on Niagara Falls Boulevard and mall replaced the Bontan 0:14:37.120 --> 0:14:40.520 bankrupt department store with an Amazon Amazon Whole Foods. That 0:14:40.600 --> 0:14:43.160 store is supposed to do one point to five million 0:14:43.240 --> 0:14:45.920 a week. That store is now doing less than two 0:14:46.000 --> 0:14:48.360 hundred thousand a week a year after its opening, is 0:14:48.360 --> 0:14:51.560 going to close like the Amazon bricks and mortar stores. 0:14:51.880 --> 0:14:55.160 So the retail a cop apocalypse or ice ages affecting 0:14:55.200 --> 0:14:59.800 everybody from Sears to Amazon. Because while Bezos and my views, 0:15:00.080 --> 0:15:03.160 most brilliant person who's ever worked in retail, when he's 0:15:03.240 --> 0:15:05.600 running the show, he's great. But now he's going to 0:15:05.680 --> 0:15:09.400 the show and all these side shows that he's personally 0:15:09.480 --> 0:15:13.600 distracted with his divorce. So Amazon's failing in bricks and 0:15:13.680 --> 0:15:16.240 mortar as his seers and the guys with the great 0:15:16.360 --> 0:15:19.440 leaders will win. So let's talk about who's actually doing 0:15:19.520 --> 0:15:22.040 a good job of adopting brick and mortar to the 0:15:22.120 --> 0:15:25.680 modern era in the United States. Uh, look at what 0:15:26.120 --> 0:15:29.520 Frank Blake did to completely turn around Home Depot before 0:15:29.560 --> 0:15:34.520 he became chairman of Delta doing doing tremendous job off price. 0:15:34.880 --> 0:15:38.040 Uh is you've referenced well a number of times, Lisa, 0:15:38.400 --> 0:15:40.880 whether it's Ali's bargain stores on the low end or 0:15:41.600 --> 0:15:45.960 Burlington or t j X or Ross off price. Customers 0:15:46.600 --> 0:15:50.120 want to shop primarily on price Chris Baldwin. But this 0:15:50.200 --> 0:15:52.640 has something to do with the experience, right, Uh, the 0:15:52.800 --> 0:15:58.000 experience and and price. So it's a combination, uh, treasure hunt. 0:15:58.120 --> 0:16:00.760 In terms of the experience home DEEPO is a great 0:16:00.800 --> 0:16:04.240 experience in store online uh. And if and if you 0:16:04.360 --> 0:16:08.040 look at a number of others from the department stores 0:16:08.120 --> 0:16:13.720 and luxury start with South Korea, then then go to London, Paris, Uh, 0:16:13.840 --> 0:16:17.440 you go to Dubai uh and and throughout the PRC 0:16:17.600 --> 0:16:20.320 in Japan. A lot of great in store experiences, but 0:16:20.400 --> 0:16:25.160 the retailers are looking at everything in cap as access 0:16:25.200 --> 0:16:28.600 and expense rather than an investment to profitably drive sales. Yeah, 0:16:28.680 --> 0:16:30.560 definitely gonna be a big challenge. How do you invest? 0:16:30.640 --> 0:16:34.200 Will also watched declining sales and adopt to a modern 0:16:34.280 --> 0:16:36.920 era both in brick and mortar as well as on 0:16:37.240 --> 0:16:39.760 their online platforms. But Bert flickant Jer, thank you so 0:16:39.880 --> 0:16:42.480 much for being here. As always, Bert flickint Jer, Managing 0:16:42.520 --> 0:16:46.240 director at Strategic Resource Group. You know, definitely a big 0:16:46.360 --> 0:16:50.640 existential question facing retail. How big can the brick and 0:16:50.680 --> 0:16:53.720 mortar presence be? How do you fight against Amazon dot Com. 0:17:09.600 --> 0:17:13.800 So trade talks on off, on again, perhaps off again. 0:17:13.880 --> 0:17:15.879 Now we know that President Trump is not going to 0:17:15.960 --> 0:17:18.720 be meeting with jumping ahead of that March first deadline. 0:17:19.080 --> 0:17:21.360 Why what happened? It's hard to know, but we knew. 0:17:21.400 --> 0:17:23.760 The one person is keeping track of it very closely. 0:17:23.840 --> 0:17:27.600 Mike McDonough, chief economist for Financial Products at Bloomberg LP, 0:17:27.800 --> 0:17:30.800 joining us here in our Bloomberg Atta Active Brokers studios. Mike, 0:17:30.920 --> 0:17:33.240 what happened? Why are the talks now off before the 0:17:33.320 --> 0:17:36.959 March first deadline? I mean, are they all right? Well? 0:17:37.000 --> 0:17:41.240 There we go? It seemed like, I mean, the Trump 0:17:41.400 --> 0:17:44.480 she meeting may apparently be postponed, but they're still having 0:17:44.520 --> 0:17:46.879 talks next week. So I mean, it's really hard to 0:17:47.040 --> 0:17:49.639 decipher what this means. I mean, I think, why are 0:17:49.680 --> 0:17:52.000 we hearing about all this? Why? Why the chatter? Why 0:17:52.040 --> 0:17:55.560 the it seems like someone asked him a question and 0:17:55.720 --> 0:18:00.480 kind of a random press conference are just discussion he 0:18:00.560 --> 0:18:02.119 was having. I'm not really sure how we we we 0:18:02.200 --> 0:18:04.040 got the information. It was actually a little bit confused 0:18:04.119 --> 0:18:06.480 by that yesterday. It was not a formal pronounced and 0:18:06.600 --> 0:18:09.360 and you know, I noticed the earliest headline I could 0:18:09.359 --> 0:18:11.679 see was at eleven thirty, and I think the um 0:18:12.560 --> 0:18:14.560 uh you know, the mark was actually selling off before that. 0:18:14.600 --> 0:18:15.960 So the whole thing kind of confused me. But so 0:18:16.080 --> 0:18:18.680 let's take a step back. Um, you know, I I 0:18:18.920 --> 0:18:21.320 don't know what this says about a potential deal. I 0:18:21.480 --> 0:18:24.920 do think that President Trump's bar for a deal has 0:18:25.000 --> 0:18:27.560 come down quite meaningfully because of what's been happening in 0:18:27.600 --> 0:18:30.760 the markets and concerns that the economy has been slowing. 0:18:31.200 --> 0:18:33.240 In fact, I wouldn't be surprised if it's come down 0:18:33.320 --> 0:18:35.760 so far. It may actually be at odds now with 0:18:35.880 --> 0:18:38.959 the people negotiating the trade deal primarily what I mean 0:18:39.040 --> 0:18:41.080 by that is Lighthouser, so you know, we could have 0:18:41.160 --> 0:18:44.800 a conflict there. Uh So I'm still optimistic we're going 0:18:44.880 --> 0:18:46.760 to reach some sort of deal. I think we'll get 0:18:46.840 --> 0:18:50.200 the best possible deal, which will not be what Trump 0:18:50.280 --> 0:18:52.639 had originally proposed, but we will. He will get some 0:18:53.280 --> 0:18:56.840 uh consolations. I think that we'll have some tangible stuff 0:18:56.880 --> 0:18:59.160 as it relates to the deficit, and I think we'll 0:18:59.200 --> 0:19:02.000 have promise is for some of the more difficult challenges, 0:19:02.040 --> 0:19:05.840 the intellectual property opening up an investment in some Chinese sectors, 0:19:06.119 --> 0:19:08.440 and I think right that the difficult thing is going 0:19:08.520 --> 0:19:11.119 to be uh what kind of measures are put in 0:19:11.200 --> 0:19:13.480 place to enforce those? And I think that's probably where 0:19:13.520 --> 0:19:15.720 the negotiations are centered right now. And I think the 0:19:15.840 --> 0:19:18.399 Chinese are realized now and are more willing to to 0:19:18.480 --> 0:19:20.600 give more concessions as well. So I do think a 0:19:20.720 --> 0:19:24.680 deal is possible. This delay of of the She Trump 0:19:24.760 --> 0:19:27.159 meeting is confusing because he said that it will be 0:19:27.240 --> 0:19:29.680 finalized at a meeting between us. If they don't meet 0:19:29.800 --> 0:19:32.560 by the deadline, what happens. Do we get the tariffs? 0:19:32.640 --> 0:19:34.879 Do we not get the tariffs? I suppose we'll know 0:19:35.000 --> 0:19:37.720 more next week when the the meetings do happen, not 0:19:37.840 --> 0:19:43.280 between uh She and Trump, but between more junior negotiation. So, Mike, again, 0:19:43.560 --> 0:19:46.280 it's do you have a sense of who's more incentive 0:19:46.359 --> 0:19:48.359 to get a deal done? I think we hear about 0:19:49.040 --> 0:19:51.760 China's economy slowing. Obviously we know that that. Maybe we've 0:19:51.800 --> 0:19:54.040 had some people come in here saying it's slowing materially 0:19:54.119 --> 0:19:56.719 more than the government is letting on, I e. They 0:19:56.840 --> 0:19:58.760 may be more incentive to do a deal. Do you 0:19:58.920 --> 0:20:02.560 buy into that? Well? I think you know, looking at 0:20:02.640 --> 0:20:05.400 last year, you had a problem where it was their 0:20:05.480 --> 0:20:08.480 deleveraging agenda that was causing the slowdown in the country. 0:20:08.520 --> 0:20:10.879 Trade wasn't really a factor. Yet you still have the 0:20:10.920 --> 0:20:13.679 issue with the deleveraging agenda slowing down growth more than 0:20:13.720 --> 0:20:16.359 they anticipated. And then you add on top of that trade. 0:20:16.720 --> 0:20:18.640 So yeah, that does put a lot of pressure on China. 0:20:18.680 --> 0:20:20.199 But I think if you look at you know, when 0:20:20.240 --> 0:20:24.120 President Trump started this um with China, US GDP growth 0:20:24.200 --> 0:20:26.520 was over three percent, the markets were rallying, everything was 0:20:26.560 --> 0:20:29.480 looking great. In the US, things don't look as good now. 0:20:29.680 --> 0:20:32.600 Sentiment is collapsing. If you look at one measure in 0:20:32.640 --> 0:20:34.840 the University of Michigan and the percent of people who 0:20:35.400 --> 0:20:38.800 um randomly make good comments about government economic policy, it's 0:20:38.840 --> 0:20:41.720 at the lowest it's ever been. During the Trump presidency, 0:20:42.280 --> 0:20:44.760 you had the shutdown, So there's some erosion and confidence 0:20:44.800 --> 0:20:47.800 in the economic agenda in the US. So Trump needs 0:20:47.840 --> 0:20:49.800 some wins, and this could be a nice, good, easy 0:20:49.880 --> 0:20:52.280 win that could bring some confidence back. Which brings us 0:20:52.320 --> 0:20:55.040 back to the confusing head scratcher of yesterday when we 0:20:55.160 --> 0:20:57.720 got the headlines at President Trump was not going to 0:20:57.800 --> 0:21:01.000 be attending a meeting with President of China and just 0:21:01.080 --> 0:21:03.119 to put this in a perspective about why we're focusing 0:21:03.160 --> 0:21:05.040 on it if we don't really have a lot of 0:21:05.119 --> 0:21:08.720 clarity there. Arguably that's what sunk the NASDAC and the 0:21:08.840 --> 0:21:12.280 DOO in particular, and sort of led the week into 0:21:12.520 --> 0:21:14.760 a rather negative tone, right. I mean, this actually did 0:21:14.840 --> 0:21:17.600 have a market effect. We saw it happen when the 0:21:17.640 --> 0:21:21.200 headlines hit. We saw stocks taken a further leg lower 0:21:21.400 --> 0:21:25.280 in the US. So my question is, if they are 0:21:25.359 --> 0:21:28.560 not talking, or if President Trump doesn't meet with Jim Ping, 0:21:28.960 --> 0:21:31.280 could we still get a deal ahead of that March 0:21:31.320 --> 0:21:35.200 first deadline? I think anything Obviously it is possible, but 0:21:35.280 --> 0:21:38.360 I mean, though it seems unlikely, but maybe we could 0:21:38.400 --> 0:21:41.240 get an extension of the deadline to accommodate the meeting. 0:21:41.359 --> 0:21:43.080 And what would I mean, would that be considered a 0:21:43.119 --> 0:21:50.920 win for who? Fair enough? My point is that is that, 0:21:51.160 --> 0:21:53.119 I mean, is that enough of the market thank you? 0:21:53.200 --> 0:21:55.159 Oh yeah, I mean I think I think thank you 0:21:55.240 --> 0:21:57.840 for understanding. Maybe if you if you get that extension, 0:21:58.520 --> 0:22:02.240 I think that would imply a deal is basically has 0:22:02.320 --> 0:22:04.440 been reached and it's a formality that they need to 0:22:04.520 --> 0:22:06.080 meet and then sign the deal. So I think that 0:22:06.160 --> 0:22:07.959 the market would look at that as a positive. If 0:22:07.960 --> 0:22:11.400 there I'm not talking about like another three six month extension. 0:22:11.440 --> 0:22:14.080 I'm talking about saying we're going to extend this deal 0:22:14.520 --> 0:22:16.760 another couple of weeks or whatever to accommodate a meeting 0:22:16.840 --> 0:22:19.399 between President and President Trump to finalize some of the 0:22:19.480 --> 0:22:23.280 loose ends our promises enough, like if they promised on technology, 0:22:23.359 --> 0:22:26.119 that's not enough. No, And I think that's that's one 0:22:26.200 --> 0:22:28.240 of the key points right now is they're trying to 0:22:28.280 --> 0:22:31.040 figure out what enforcement mechanisms they could put in place 0:22:31.520 --> 0:22:33.600 that they could track over the next two years on 0:22:33.680 --> 0:22:35.960 some of the uh following through with some of the 0:22:36.040 --> 0:22:39.840 more difficult challenges. I mean, you know, you know, it's interesting. 0:22:39.960 --> 0:22:42.119 Thank you, Mike McDonald, Thank you very much. We always 0:22:42.119 --> 0:22:44.840 appreciate your your insights here. Mike is the chief economist 0:22:44.880 --> 0:22:47.359 financial Products from Bloomberg LP. He joins us in our 0:22:47.359 --> 0:22:50.440 Bloomberg eleven three oh studios. Uh. You know, I don't know, 0:22:50.560 --> 0:22:53.040 color meet pessimistic, but that you know, I think some 0:22:53.119 --> 0:22:54.919 of the big issues that have to be addressed here 0:22:54.960 --> 0:22:58.159 on the trade deal are the very hard issues about technology, 0:22:58.160 --> 0:23:04.000 about intellectual property. It's about soybeans, paulbeans, but at some 0:23:04.080 --> 0:23:05.800 point they're gonna have to get down to brass tacks 0:23:05.840 --> 0:23:08.240 and go to those very tough issues which are really 0:23:08.359 --> 0:23:25.600 economically material. We have seen the price of iron or 0:23:25.920 --> 0:23:29.600 surge by more than twenty five over the past ten sessions, 0:23:29.880 --> 0:23:31.920