WEBVTT - Democrats Need Message for Working Class, E. J. Dionne Says 0:00:00.120 --> 0:00:02.920 Brought you by Bank of America Mary Lynch. Investing in 0:00:03.000 --> 0:00:07.840 local communities, economies and a sustainable future. That's a power 0:00:08.080 --> 0:00:12.360 of global connections. Mary Lynch, Pierce Fenner and Smith Incorporated 0:00:12.760 --> 0:00:27.400 Member s I p C. Welcome to the Bloomberg Surveillance Podcast. 0:00:27.840 --> 0:00:31.520 I'm Tom Keene with David Gura. Daily we bring you 0:00:31.560 --> 0:00:36.600 insight from the best in economics, finance, investment and international relations. 0:00:37.000 --> 0:00:41.600 Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and 0:00:41.680 --> 0:00:49.960 of course on the Bloomberg. We begin with Sebastian Galley. 0:00:49.960 --> 0:00:51.959 He's a senior currency strategy of Boutsche Bank and he's 0:00:52.000 --> 0:00:54.920 kindly joined us here on Bloomberg eleven. Three Oh studios, 0:00:55.000 --> 0:00:57.400 Let's start with Breggsit. We're looking ahead to April five, 0:00:58.040 --> 0:01:01.000 when the EU Parliament begins to take up what we've 0:01:01.040 --> 0:01:05.360 seen working its way from London to Brussels. What was 0:01:05.400 --> 0:01:07.240 your sense of what reason they had to say in 0:01:07.280 --> 0:01:08.760 her speech and sort of how this is all going 0:01:08.800 --> 0:01:11.959 to play out over these next these next two years. Well, 0:01:11.959 --> 0:01:15.119 what do you have is typical incoherence between one party 0:01:15.120 --> 0:01:17.039 and the second and when they send you to a 0:01:17.120 --> 0:01:20.000 training in the Europe in EU for negotiation and actually 0:01:20.120 --> 0:01:22.280 was one of these officials. The first thing they teach 0:01:22.360 --> 0:01:25.120 you is that the beginning is a high divergence and 0:01:26.000 --> 0:01:28.160 one next step is basically too showing what each of 0:01:28.240 --> 0:01:29.920 the parties wants to show. And this is what the 0:01:29.959 --> 0:01:32.440 UK has done. It's shown this roadmap. The Europeans have 0:01:32.640 --> 0:01:34.959 leaked their own road maps. It's all very helpful and 0:01:35.040 --> 0:01:37.920 very civilized, and both of the road maps actually are 0:01:37.959 --> 0:01:41.039 completely incoher and this is absolutely normal. What you show 0:01:41.160 --> 0:01:43.839 is you show your cards and then you do the exchange. 0:01:43.840 --> 0:01:46.400 So what is are you willing to exchange? Apparently the 0:01:46.440 --> 0:01:48.160 British are having a bit of a sense of humor 0:01:48.200 --> 0:01:51.400 and suggesting that Gibraltar is off the map, and so 0:01:51.680 --> 0:01:54.040 I don't think that's what the Europeans were looking for. 0:01:54.240 --> 0:01:56.960 But the exchange will happen and the right. The problem 0:01:57.040 --> 0:01:58.720 is that they only have two years to figure out 0:01:58.720 --> 0:02:01.920 what they can give and on each side, and it 0:02:01.960 --> 0:02:05.280 looks like it's politically difficult for the British to accept 0:02:05.320 --> 0:02:08.920 some realities. Um and they'll take them to sometime basically 0:02:08.919 --> 0:02:13.880 to diffuse the reality through the UK political system. They 0:02:13.919 --> 0:02:17.160 already have accepted that they will actually contribute monies uh 0:02:17.240 --> 0:02:20.160 to the European Union, which for conservative is extremely hard 0:02:20.200 --> 0:02:23.079 to do UM. And so there's a nice, decent process. 0:02:23.240 --> 0:02:25.720 Will will it happen within two years? And very few 0:02:25.720 --> 0:02:30.280 people expected, particularly the European typical negotiations the last five 0:02:30.360 --> 0:02:32.400 to up to ten years, and so this is probably 0:02:32.440 --> 0:02:35.000 more what we should look forward to. The UK is 0:02:35.040 --> 0:02:36.960 doing his job, Europe is doing his job. There's going 0:02:37.000 --> 0:02:39.120 to be a lot of noise UM, which is typical 0:02:39.120 --> 0:02:41.320 at the beginning of the process. That noise will eventually 0:02:41.320 --> 0:02:44.200 start to settle down and converge towards some form of solution. 0:02:44.280 --> 0:02:46.200 It will be very painful in detail. It will go 0:02:46.240 --> 0:02:50.280 into Spanish fishermen going into uh UK territorial waters and 0:02:50.320 --> 0:02:52.760 the likes and the usual stuff we've been dealing with 0:02:53.000 --> 0:02:55.360 in Europe for a long time. So very European. Actually, 0:02:55.480 --> 0:02:57.680 how does this affect your world over these next these 0:02:57.760 --> 0:02:59.800 next two years. You've got these two disparate maps, as 0:02:59.840 --> 0:03:02.600 you say, a lot of noise in the fore x space. 0:03:02.639 --> 0:03:05.519 How do you approach what's happening? Well, what it does 0:03:05.760 --> 0:03:08.440 suggest is the for now in the UK is kind 0:03:08.440 --> 0:03:10.960 of fine from a legal point of view in terms 0:03:10.960 --> 0:03:13.400 of its access and everything. So that might actually continue 0:03:13.440 --> 0:03:16.520 for longer than anyone would would expect. So it's a 0:03:16.600 --> 0:03:19.119 less of a concern I guess from a short term 0:03:19.120 --> 0:03:20.799 tactical point of view, from the point of view of 0:03:20.919 --> 0:03:25.800 somebody investing into the UK as uh, these uh, you know, 0:03:25.880 --> 0:03:28.760 these different negotiations clarify themselves and that might may take 0:03:28.840 --> 0:03:30.720 up to a year, and then the in terms of 0:03:30.760 --> 0:03:32.840 FDI and the like, it is actually going to be 0:03:33.200 --> 0:03:37.560 a decent story. The pound by some measures is undervalued. Uh, 0:03:37.640 --> 0:03:39.920 and so it might be attractor for people investing in 0:03:39.960 --> 0:03:42.920 commercial real estate real estate into into the United Kingdom. 0:03:43.240 --> 0:03:45.920 Might be interesting for some sovereign wealth funds and reserve 0:03:46.000 --> 0:03:48.240 managers to to build up some positions in the in 0:03:48.280 --> 0:03:50.360 the UK. And so it's it's not such a bad 0:03:50.400 --> 0:03:53.680 story for the UK. The market has vastly priced the 0:03:53.680 --> 0:03:56.680 Brexit story for good reasons and uh, and you know, 0:03:56.800 --> 0:03:59.760 they does offer some considerable opportunities for for the UK 0:04:00.040 --> 0:04:03.760 has not necessarily a manufacturing base, but a base of 0:04:03.880 --> 0:04:06.560 services which is somewhat cheaper. It allows them to keep 0:04:06.600 --> 0:04:09.280 the city because it has reduced the cost of holding 0:04:09.280 --> 0:04:11.960 the city, uh in the UK versus you know, moving 0:04:12.000 --> 0:04:15.480 a lot of their people out into Ireland, UH, France 0:04:15.600 --> 0:04:18.000 or Germany for that matter, but some of it will happen. 0:04:18.640 --> 0:04:21.600 You had the EU commissioned President, you Council president rather 0:04:21.640 --> 0:04:24.120 talking about how united in front these twenty seven nations 0:04:24.160 --> 0:04:27.080 we're gonna we're gonna present. Is this an opportunity for 0:04:27.200 --> 0:04:30.359 more cohesiveness or does the fractiousness of the EU continue 0:04:30.400 --> 0:04:32.239 to play role that that's going to make it difficult 0:04:32.240 --> 0:04:34.839 for these negotiations take place. I like to think of 0:04:34.880 --> 0:04:37.680 it as UH and for some reason why Irish accident 0:04:37.760 --> 0:04:40.440 is coming back. But the this probably goes I'm thinking 0:04:40.440 --> 0:04:42.680 about rugby, but it's it's like a big rugby team 0:04:42.680 --> 0:04:46.160 and none of the players individually or are quite similar 0:04:46.200 --> 0:04:50.240 body shape, attitude or the likes, but they do act 0:04:50.760 --> 0:04:53.400 under crunch as as one unit. And this is typically 0:04:53.440 --> 0:04:55.240 what you do see. And in the case of the UK, 0:04:55.360 --> 0:04:58.080 is a pretty clear story. Um and it's not a 0:04:58.160 --> 0:05:01.520 very divisive one. There are always outliers, are always better 0:05:01.520 --> 0:05:04.400 places than others, but broadly speaking they actually do behave 0:05:04.640 --> 0:05:06.760 as a whole. One of the reasons is it's not 0:05:06.800 --> 0:05:09.240 necessary to punish the UK is to make it more difficult. 0:05:10.120 --> 0:05:12.960 You're colleing. Allen Ruskin is the one that I guess 0:05:13.000 --> 0:05:17.279 has provided leadership on an outlier call of weaker sterling. 0:05:17.760 --> 0:05:20.600 How do you get to a Deutsche Bank weaker sterling? 0:05:20.880 --> 0:05:24.360 It is an abrupt I'm sorry. It's a game changing 0:05:24.440 --> 0:05:28.080 decline for the United Kingdom, isn't it. There are two 0:05:28.120 --> 0:05:30.360 components to it. One is a strong dollar view, which 0:05:30.400 --> 0:05:32.640 of course would push sterling lord a. Number two is 0:05:32.640 --> 0:05:34.760 a recognition that some of the impulse we've seen in 0:05:34.800 --> 0:05:37.480 the UK is actually quite temporary from cyclical point of view, 0:05:37.480 --> 0:05:40.320 and as it fades lower um, the the b o 0:05:40.400 --> 0:05:42.400 E is de wish and probably will end up being 0:05:42.440 --> 0:05:45.440 more do wish than people expect um. And the combination 0:05:45.520 --> 0:05:48.719 relatively weak growth and to some extend a stronger dollar, 0:05:49.040 --> 0:05:51.440 as well as some of the improvement that we've seen 0:05:51.440 --> 0:05:54.159 on the cure and account reversing that generally is not 0:05:54.240 --> 0:05:56.480 particularly good. So from a cyclical point of view, there 0:05:56.560 --> 0:05:58.880 there is a claim to be made, which we do 0:05:59.360 --> 0:06:02.880 that sterling should headlore Having said that the this is 0:06:02.920 --> 0:06:05.560 a view which is held by the market. One on Brexit, 0:06:06.120 --> 0:06:08.000 it has made a lot of money on that number 0:06:08.040 --> 0:06:10.560 two because there are positions related to France, which are 0:06:10.720 --> 0:06:14.440 yours sterling positions? People have been basically being short year 0:06:14.640 --> 0:06:17.800 and long sterling, and that, of course is is not 0:06:17.880 --> 0:06:19.560 helpful if you if you want to have an outright 0:06:19.600 --> 0:06:22.160 sterling position, The bet there is on a McCrone win 0:06:22.600 --> 0:06:25.240 when you look at it, when you look at euros sterling. Yeah, 0:06:25.320 --> 0:06:28.120 there are very heavy bets apparently in the market which 0:06:28.240 --> 0:06:31.960 are done through your sterling, your yen short bounds, as 0:06:32.040 --> 0:06:35.080 well as on the O A t U there then 0:06:35.120 --> 0:06:37.880 through equities basically a bet that Mr mccorn will it 0:06:37.920 --> 0:06:41.400 will actually win. How do you adjust that to what 0:06:41.440 --> 0:06:47.240 we observed? I forget about September August twenty, August thirty one, 0:06:47.680 --> 0:06:52.240 September two, September four, and then ten pm September eight? 0:06:53.320 --> 0:06:56.600 Is there any humility about poles in France? Given what 0:06:56.640 --> 0:07:00.919 we witnessed in the United States? You you wouldn't believe 0:07:00.920 --> 0:07:03.080 the amount of work we actually spend on on poles 0:07:03.080 --> 0:07:07.760 in general and pulsar spend on poles in general. We 0:07:07.800 --> 0:07:09.560 do know it's actually very useful. So what do we 0:07:09.680 --> 0:07:11.720 do is we look at they do what do they 0:07:11.760 --> 0:07:15.200 call rolling polls, so which basically UH is statistically superior. 0:07:15.680 --> 0:07:18.400 Number two they use what we call stratified polling, which 0:07:18.440 --> 0:07:20.160 is you're going to look at every type of worker, 0:07:20.200 --> 0:07:22.680 for example, every type of age, and you look in 0:07:22.760 --> 0:07:26.840 extreme details, um and then there are different companies competing 0:07:26.880 --> 0:07:29.120 against each other to see basically if we actually get 0:07:29.120 --> 0:07:31.280 the same numbers. And then the journalists of course do 0:07:31.320 --> 0:07:33.520 not believe whatsoever with the polls are and they have 0:07:33.560 --> 0:07:36.200 decided in France that they would send people across the 0:07:36.280 --> 0:07:38.880 field to check and see if there are basically trends 0:07:38.880 --> 0:07:41.280 which are being missed by the polls. We know that 0:07:41.320 --> 0:07:44.440 there are bosses the poles. These poles, for example, exclude 0:07:44.640 --> 0:07:47.640 the people like me, the French outside of the France, 0:07:47.880 --> 0:07:51.040 as well as their French outside of metropolitan France, and 0:07:51.080 --> 0:07:53.520 that gives actually bias of roughly plus one percent to 0:07:53.600 --> 0:07:56.440 MA on the second round because they tend to be 0:07:56.480 --> 0:08:00.120 a more right way leading. Thank you so much at 0:08:00.160 --> 0:08:02.320 your bank this morning. Just lots to talk about here 0:08:02.360 --> 0:08:06.720 and really are re caliber for for April? Are you 0:08:06.760 --> 0:08:09.520 in tomorrow morning? David girl? This is this is I'm 0:08:09.560 --> 0:08:14.280 you know, feeling sick. I'm feeling like if you feel typhoid. 0:08:15.560 --> 0:08:19.360 Starts at nine. The tip off for this national championship game. 0:08:19.400 --> 0:08:21.160 Is it really? I did not know? Which does me 0:08:21.240 --> 0:08:24.480 no favors here have to watch the surveillance replay the following. 0:08:24.640 --> 0:08:27.840 I'm in the eleventh percentile. I feel pretty good. I'm 0:08:27.880 --> 0:08:31.680 like walking around, strutting around, seb I do this as 0:08:31.680 --> 0:08:34.679 like rugby. I do it off the color of the jersey. 0:08:35.840 --> 0:08:38.480 That's that's how I do it. And Michael Barr, I'm 0:08:38.480 --> 0:08:42.960 in the eleventh percentile. And then sat Rachel walked in 0:08:43.040 --> 0:08:48.199 this morning. Do you realize she is number four out 0:08:48.200 --> 0:08:52.320 of people in in all of Bloomberg Bloomberg Land. Ya. 0:08:52.480 --> 0:08:55.200 This is our executive producer Folks, who often sits between 0:08:55.200 --> 0:08:58.640 me and David and radio to keep us apart. I 0:08:58.720 --> 0:09:00.520 knew it wasn't me because that when I walked in 0:09:00.559 --> 0:09:05.199 the door I heard typhoid. Do you know that Rachel 0:09:05.920 --> 0:09:09.800 even had Purdue going long and she's still like kills 0:09:09.840 --> 0:09:17.080 her even though her boiler makers went down flames. It's extraordinary. Yeah, well, 0:09:17.200 --> 0:09:19.520 I had to look up for Gonzaga. Is this weekend? 0:09:19.520 --> 0:09:24.480 To be honest, Good morning Eastern Washington. No thrill, that's thrilled. 0:09:24.520 --> 0:09:29.199 You're listening in Washington State, in Idaho and Spokane or Spokeane, 0:09:29.240 --> 0:09:35.640 I think I watched a tip off. Don't wake up 0:09:35.640 --> 0:09:38.680 when the game has finished. What's what the Rangers are doing? Now? Okay, 0:09:38.679 --> 0:09:41.200 folks had fun with this. I mean, I gotta hate 0:09:41.280 --> 0:09:44.600 mail this weekend from Manila. You know nothing about basketball, 0:09:44.600 --> 0:10:00.400 I said, You're right, David Gern Tom Kane, good morning everyone. 0:10:00.640 --> 0:10:07.880 I appreciate your attendance in Washington in our FM news bureau. Uh. 0:10:07.920 --> 0:10:11.120 Ted Alden of the Council on Foreign Relations, This book 0:10:11.200 --> 0:10:13.400 is Failure to a just can't say enough about it 0:10:13.760 --> 0:10:17.720 on trade, Jed. All of my reading on China is 0:10:17.760 --> 0:10:21.600 that they have ever advantage to wait and wait and wait. 0:10:22.040 --> 0:10:26.800 Do they outweigh this president to the next president? Oh? I, 0:10:26.800 --> 0:10:29.199 I think there's no question. You know, they're they're playing 0:10:29.240 --> 0:10:31.240 the long game. They're very patient. I think if you 0:10:31.280 --> 0:10:36.240 look at the way they reacted to Trump after the election, 0:10:36.320 --> 0:10:40.520 during the transition period, he was firing off some provocative tweets. 0:10:40.679 --> 0:10:43.240 UH call with the president of Taiwan. He did a 0:10:43.320 --> 0:10:46.680 number of provocative things, and the Chinese responded quite calmly 0:10:46.720 --> 0:10:49.240 and steadily. So yeah, I think they will wait as 0:10:49.280 --> 0:10:51.400 long as they need to wait. Ted. I talked to 0:10:51.400 --> 0:10:53.439 Wilba Ross, the Secretary of Commerce, on Friday, and I 0:10:53.440 --> 0:10:55.400 asked him what was going to be on the agenda 0:10:55.440 --> 0:10:57.440 for these meetings in Florida. He said, trade is gonna 0:10:57.440 --> 0:11:00.480 be high up there. What is this administration? What what's 0:11:00.480 --> 0:11:03.280 the outcome they hope for out of this this meet 0:11:03.320 --> 0:11:05.319 and greet that's this two day meeting at mar Lago. 0:11:06.080 --> 0:11:10.360 I do not think they have any particular deliverables in mind. 0:11:10.440 --> 0:11:13.760 I think they want to try to get some sense 0:11:13.800 --> 0:11:15.760 that the Chinese are wanting to cooperate on North Korea, 0:11:15.800 --> 0:11:18.840 which is obviously at something of a crisis point in 0:11:18.960 --> 0:11:23.160 terms of North Korea's ability to to develop a deliverable 0:11:23.280 --> 0:11:25.800 nuclear missile. I think on trade, I think all they 0:11:25.840 --> 0:11:28.440 want is an acknowledgement that it's a big issue between 0:11:28.440 --> 0:11:30.640 the United States and China, that the trade deficit is 0:11:30.640 --> 0:11:32.960 a problem, and that they're going to deal with it. 0:11:33.000 --> 0:11:35.640 I don't expect anything more specific than that out of 0:11:35.679 --> 0:11:38.360 this meeting. Secretary Ross was at his most animated when 0:11:38.360 --> 0:11:40.400 I asked him about this letter, this draft of a 0:11:40.480 --> 0:11:44.000 letter that was leaked by congressional staffers. UH to to 0:11:44.040 --> 0:11:46.000 get anaf to talk started again, you have to give 0:11:46.120 --> 0:11:48.960 ninety days notice. I I gather, what's your sense of 0:11:48.960 --> 0:11:52.400 the timetable there. This administration seems eager to reopen conversations 0:11:52.400 --> 0:11:54.640 about what happens to NAFTA. Do we know more about 0:11:55.000 --> 0:11:58.040 what provisions in particular they hope to see changed. Well, 0:11:58.080 --> 0:12:00.000 that that letter is a bit of a laundry letter. 0:12:00.040 --> 0:12:01.800 Stand there are things in there that have been on 0:12:01.840 --> 0:12:03.520 the agenda for a long time. There's a bunch of 0:12:03.520 --> 0:12:05.920 things in there, ironically that we're renegotiated as part of 0:12:05.920 --> 0:12:09.320 the Transpacific Partnership that President Trump walked away from on 0:12:09.400 --> 0:12:11.400 day one. And there are other items that I think 0:12:11.440 --> 0:12:14.520 would be very controversial, um, you know, taking a look 0:12:14.520 --> 0:12:19.319 at at tax issues, the dispute settlement process, over trade cases, 0:12:19.360 --> 0:12:22.360 anti dumping, countervailing duty cases, that US wants a kind 0:12:22.360 --> 0:12:25.040 of snap back provision where it can reimpost tariffs. So 0:12:25.040 --> 0:12:27.199 so there are some pretty explosive items in that list. 0:12:27.280 --> 0:12:28.800 We just don't know what the priority is. It's a 0:12:28.800 --> 0:12:30.839 bit of a laundry list at this point, a bit 0:12:30.840 --> 0:12:32.559 of a laundry list. And I was surprised as well, 0:12:33.000 --> 0:12:35.920 drawing from that conversation the degree to which Secretary Ross 0:12:35.920 --> 0:12:38.640 said that the the TPP would provide some starting points 0:12:38.679 --> 0:12:41.920 for these negotiations. So I suppose the t p P 0:12:42.120 --> 0:12:44.920 lives on. What do you think will will continue to 0:12:44.960 --> 0:12:47.360 shape trade policy from that that trade bill that we've 0:12:47.360 --> 0:12:51.240 stepped out of. I I think that this administration is 0:12:51.320 --> 0:12:55.079 just in this period where it's trying to figure out 0:12:55.160 --> 0:12:58.280 where the openings are. I mean, Donald Trump has made 0:12:58.280 --> 0:13:00.480 a lot of big promises on trade that he's gonna 0:13:00.920 --> 0:13:03.840 change direction in some fundamental ways, and and everything that 0:13:03.880 --> 0:13:06.360 we've seen so far is rather modest. I mean Paul 0:13:06.440 --> 0:13:09.360 Krugman in his column this morning called the executive actions 0:13:09.360 --> 0:13:11.839 on Friday a couple of nothing burgers, and I think 0:13:11.880 --> 0:13:15.000 that was largely correct. Um, I don't think that there 0:13:15.080 --> 0:13:19.160 there's anything there, so so I I continue to be 0:13:19.240 --> 0:13:21.960 puzzled what kinds of specifics they're they're gonna go for. 0:13:22.000 --> 0:13:24.160 They've got more cautious, which may be a good thing. Well, 0:13:24.240 --> 0:13:28.080 if we all understand anybody listen to this, whatever their politics. 0:13:28.760 --> 0:13:31.680 Multilateral is gone. It was from another time and place. 0:13:32.320 --> 0:13:35.800 And then I guess there's bilateral, and then there's unilateral. 0:13:35.840 --> 0:13:39.200 And to pick up by nothing burgers, is there no lateral? 0:13:39.920 --> 0:13:42.160 Is the basic idea here is we have a party 0:13:42.280 --> 0:13:45.440 or a theology that says, we don't want to do trade, 0:13:45.480 --> 0:13:48.199 we don't want to argue with anybody. Well, I mean 0:13:48.240 --> 0:13:50.400 you you could. I mean you you could have an 0:13:50.400 --> 0:13:53.199 administration that says, look, we're gonna live with the status 0:13:53.320 --> 0:13:55.959 quo in terms of the agreements, and we're going to 0:13:56.040 --> 0:13:59.760 try to do better in terms of exporting using the 0:14:00.000 --> 0:14:01.520 as we have. There's nothing wrong with that. I mean, 0:14:01.520 --> 0:14:04.280 there's nothing that says that every agreement has to be 0:14:04.320 --> 0:14:07.120 superseded by another agreement and another agreement. We've been doing 0:14:07.160 --> 0:14:09.440 that for fifty or sixty years, but there's no ironclad 0:14:09.480 --> 0:14:11.400 law that you have to keep doing that. You could 0:14:11.440 --> 0:14:14.960 just work in the rules you've got. Right now, what's 0:14:15.000 --> 0:14:17.880 this document gonna look like that Secretary Ross and his 0:14:17.880 --> 0:14:20.440 colleagues are going to prepare over these next ninety days? 0:14:20.440 --> 0:14:22.560 He called it unprecedented degree to which he's gonna look 0:14:22.560 --> 0:14:24.880 at this on a company by company basis. Helped me 0:14:24.920 --> 0:14:27.000 with the history. How unprecedented is it? And then what 0:14:27.000 --> 0:14:30.600 what's a what's that ninety ninety day document gonna look like? Well? 0:14:30.600 --> 0:14:32.680 I don't think it is all that unprecedented. I mean, 0:14:32.680 --> 0:14:36.240 the US Trade Representatives Office every year releases what's called 0:14:36.240 --> 0:14:39.320 the National Trade Estimates, and it looks into foreign trade bearers. 0:14:39.360 --> 0:14:42.680 It's a five hundred plus page document of all the 0:14:42.720 --> 0:14:45.160 places that we think our trading partners aren't living up 0:14:45.200 --> 0:14:47.720 to their obligations. I presume it's going to repeat a 0:14:47.800 --> 0:14:50.480 lot of that. The only difference maybe a bit more 0:14:50.520 --> 0:14:53.040 of a focus specifically on the countries with which the 0:14:53.120 --> 0:14:56.640 US runs a large trade deficit. But but of course, 0:14:56.720 --> 0:14:58.360 I mean, as you know, trade deficits are not all 0:14:58.440 --> 0:15:00.080 driven by trade policy. A lot of it has to 0:15:00.080 --> 0:15:03.320 do with savings and balances and big macro economic question. 0:15:03.360 --> 0:15:04.680 I don't know whether they're gonna get into that. I 0:15:04.680 --> 0:15:08.119 don't know where they're include currency. That's treasury territory historically, 0:15:08.440 --> 0:15:10.920 a lot of unknowns. Again, Ted Alton, thank you so 0:15:11.000 --> 0:15:13.680 much with the consolant Foreign Relations is Important book as 0:15:13.760 --> 0:15:26.440 Failure two Adjustment, brought you by Bank of America. Mary Lynch, 0:15:26.520 --> 0:15:30.800 dedicated to bringing our clients insights and solutions to meet 0:15:30.840 --> 0:15:34.320 the challenges of a transforming world. That's the power of 0:15:34.360 --> 0:15:40.160 global connections. Mary Lynch, Pierce feederin Smith Incorporated, Member s 0:15:40.240 --> 0:15:46.600 I p C. Mr renn is with the Scott Wren 0:15:46.680 --> 0:15:51.640 when we won't ask about Scott Rens Brackett. Scott help 0:15:51.680 --> 0:15:55.680 me with the equity market bracket if you would. Uh, 0:15:55.840 --> 0:15:59.000 we're just talking with Lindsay Bell of c f r 0:15:59.040 --> 0:16:02.120 A about the the double digit reality we live in. 0:16:02.640 --> 0:16:06.920 When does that end? Well, Tom Lee, let's talk about 0:16:06.920 --> 0:16:09.720 the market, because my best ball bracket was a complete disaster. 0:16:09.920 --> 0:16:14.160 But you know, our view really hasn't changed in terms 0:16:14.160 --> 0:16:16.480 of what the market's going to do this year since 0:16:17.000 --> 0:16:19.960 late September of last year when we set our targets. 0:16:20.000 --> 0:16:22.600 You know, we've been looking for the SMP five to 0:16:23.040 --> 0:16:26.720 hit its annual high for somewhere around the middle of 0:16:26.760 --> 0:16:29.320 the year. Um. You know, we have an upper end 0:16:29.360 --> 0:16:32.440 of our target ranges. We thought it would be at 0:16:32.560 --> 0:16:36.040 our our slightly above that. We've been slightly above that. 0:16:36.560 --> 0:16:39.480 So for us, um, you know, could the market trade 0:16:39.480 --> 0:16:41.720 a little bit higher? Sure? Is it going to trade 0:16:41.720 --> 0:16:43.560 a lot higher? We don't think so. We think we're 0:16:43.560 --> 0:16:46.560 going to see a fade um you know, end up 0:16:46.600 --> 0:16:50.400 somewhere somewhere like that at the end of the year. 0:16:50.480 --> 0:16:53.560 So you know, our views really have not changed over 0:16:53.600 --> 0:16:56.280 the last uh, you know, six months or so. I 0:16:56.320 --> 0:17:00.840 thought your sense of the economy Scott Rent. Well, you know, David, 0:17:00.880 --> 0:17:04.000 I think it's still you know, you're grinding and out. 0:17:04.080 --> 0:17:06.919 You're in a modest growth economy. You don't have a 0:17:06.920 --> 0:17:08.760 lot of inflation, although I think we're gonna see a 0:17:08.800 --> 0:17:10.680 little bit of wage push here and I think that's 0:17:10.680 --> 0:17:12.679 going to be the head wind really for the market 0:17:12.720 --> 0:17:15.800 in the second half here. Um, But you know, the 0:17:15.840 --> 0:17:20.080 economy continues to chug along, labor market continues to slowly improve, 0:17:20.200 --> 0:17:23.520 consumer spending is okay. So I don't think there's really 0:17:23.560 --> 0:17:26.360 been much of a change in the economy at all, 0:17:26.640 --> 0:17:32.680 not just versus twenty sixteen, but really thirteen. I mean 0:17:32.720 --> 0:17:34.520 this has been a you know, this has been a 0:17:34.560 --> 0:17:37.679 two on a calendar year kind of recovery for the 0:17:37.720 --> 0:17:41.240 most part. And and I think Throughen that's not going 0:17:41.320 --> 0:17:46.120 to change. And and really, um, probably as well. We're 0:17:46.119 --> 0:17:49.280 talking about healthcare with Lindsay at Bell. How much was 0:17:49.280 --> 0:17:52.680 was the when investors looked at that healthcare healthcare bill, 0:17:52.880 --> 0:17:54.520 the potential for a healthcare at how much was that 0:17:54.560 --> 0:17:57.400 about healthcare versus something else? How much investors actually care 0:17:57.440 --> 0:17:59.840 that had to do with healthcare. I don't think investors 0:18:00.000 --> 0:18:02.040 had very much that had to do with health care, 0:18:02.160 --> 0:18:05.280 and I think that it was just an overall feel 0:18:05.359 --> 0:18:08.240 for Okay, is this is you know, what does this 0:18:08.400 --> 0:18:11.720 mean for the rest of the agenda. Are we going 0:18:11.760 --> 0:18:13.600 to see anything at all? We're going to see any 0:18:13.600 --> 0:18:17.720 cooperation with the president from the Republicans. We know we're 0:18:17.720 --> 0:18:20.080 not going to get much from the Democrats. So I 0:18:20.119 --> 0:18:22.840 think it was the market took it as a little 0:18:22.840 --> 0:18:26.760 bit of a broader signal, and I think overall, you know, 0:18:26.800 --> 0:18:31.480 the market has been more optimistic, or at least some 0:18:31.600 --> 0:18:35.520 investors have been more optimistic, thinking we would actually see 0:18:35.600 --> 0:18:40.240 some economic effects from some proposals in which you know, 0:18:40.280 --> 0:18:45.040 we just don't see that. I look, Scott Ram where 0:18:45.080 --> 0:18:47.800 we are and to me, is this miracle of single 0:18:47.880 --> 0:18:52.320 digit organic revenue growth becoming double digit? Wondered down the 0:18:52.400 --> 0:18:56.159 income statement. Have you been surprised at that? Have you 0:18:56.200 --> 0:19:00.760 been surprised at the persistency of leverage, good instructive use 0:19:00.800 --> 0:19:04.600 of leverage to operating margin expansion? Well, I think that, 0:19:05.359 --> 0:19:08.240 you know, margins have have really hung in here. We've 0:19:08.320 --> 0:19:10.639 looked for them to continue to hang in here. We 0:19:10.680 --> 0:19:13.720 still think they're going to be rather high. You know, 0:19:13.800 --> 0:19:16.359 the consensus Earrings estimate we've been at a hundred and 0:19:16.359 --> 0:19:18.879 twenty seven dollars. Uh, you know, I don't think it 0:19:18.920 --> 0:19:21.560 was that long ago where the consensus was at a 0:19:21.680 --> 0:19:23.920 hundred and thirty five or so. You know, now we're 0:19:23.960 --> 0:19:25.920 down to a hundred and thirty. I think we're probably 0:19:25.960 --> 0:19:29.440 gonna see estimates come off. There's about a ten percent 0:19:30.240 --> 0:19:35.320 uh ten percent expectation for the first quarter something like that. 0:19:35.400 --> 0:19:38.080 I think that's okay, but net net, the consensus I 0:19:38.080 --> 0:19:42.679 think for a little too optimistic, David. I I find 0:19:42.680 --> 0:19:47.560 it remarkable lectures, the panels of speeches I've been added 0:19:47.720 --> 0:19:51.440 part of where everybody was certain about five or six 0:19:51.520 --> 0:19:54.680 of the most eight or nine percent return on necrews 0:19:55.520 --> 0:19:58.239 just stunning. Scott R. How much of a driver are 0:19:58.280 --> 0:20:02.720 earnings at this point when you're looking well, you know, David, 0:20:02.760 --> 0:20:04.359 it's kind of funny because I don't think, you know, 0:20:04.400 --> 0:20:09.600 earnings were absolutely zero driver all through because people were 0:20:09.600 --> 0:20:13.239 looking for landeen for you know, at least a year 0:20:13.280 --> 0:20:16.520 ahead of time. I think this year earnings will be 0:20:16.720 --> 0:20:21.280 a little bit more important. Um. I don't think that 0:20:21.440 --> 0:20:25.439 you know, these modest expectations that's what we're going to see. Um, 0:20:25.480 --> 0:20:27.600 you know, to three dollars of earnings over the course 0:20:27.600 --> 0:20:30.520 of the year. You're splitting hairs there. But I think 0:20:30.920 --> 0:20:35.320 what's going to continue to to drive things and what 0:20:35.359 --> 0:20:38.600 people are going to be thinking about is what policies 0:20:39.080 --> 0:20:43.000 might be implemented. Is the magnitude going to be enough 0:20:43.040 --> 0:20:46.560 to move the needle on an eighteen trillion dollar economy? Um? 0:20:46.640 --> 0:20:49.040 And what kind of cooperation of course, all that means 0:20:49.080 --> 0:20:53.760 for you know, between Congress and new administration. So you know, earnings, 0:20:54.280 --> 0:20:56.440 you know, when you're growing two, I mean the chance 0:20:56.440 --> 0:20:59.240 of a big, big beat or a big miss. Overall, 0:20:59.359 --> 0:21:02.760 it's it's really slim um. So I don't think earnings 0:21:02.760 --> 0:21:04.880 are going to be a big driver here. But help 0:21:04.920 --> 0:21:07.960 me here with where I go. I mean bonds. Can 0:21:08.040 --> 0:21:12.520 you find a coupon that justifies ownership of bonds? Given 0:21:12.520 --> 0:21:16.160 word Cherry Yellin's heading, Well, I think that's pretty tough. 0:21:16.200 --> 0:21:17.880 And I think our you know, our fixed income guys 0:21:17.920 --> 0:21:19.920 would tell you that you still want to own some bonds. 0:21:19.960 --> 0:21:22.760 But you know, on the stock market, we're not looking 0:21:22.800 --> 0:21:24.960 for the end of the cycle. We're just looking for 0:21:25.040 --> 0:21:27.240 some headwinds, some a little bit of fear of wage 0:21:27.280 --> 0:21:30.280 inflation in a little bit of a fear that the 0:21:30.320 --> 0:21:33.240