WEBVTT - Xi Sees Tariffs As Aggravation He Doesn't Need: Magnus (Podcast) 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm Pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:33.720 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. I'm 0:00:33.760 --> 0:00:36.760 Lisa bram woids Enjoining me here in the Bloomberg Interactive 0:00:36.800 --> 0:00:40.560 Broker Studios is Paul Sweeney, head of North American Research 0:00:40.640 --> 0:00:44.839 for Bloomberg Intelligence. A lot of focus on China because 0:00:44.920 --> 0:00:47.840 even though there is this trade tension between the US 0:00:47.920 --> 0:00:51.599 and China, perhaps the real story is the slowing Chinese economy. 0:00:51.960 --> 0:00:53.720 And joining us now to really talk about that is 0:00:53.720 --> 0:00:57.880 George Magnus, associate that China Center at Oxford University, former 0:00:57.960 --> 0:01:01.120 chief economist of U B a US. George, I want 0:01:01.120 --> 0:01:03.720 to start with that. With the retail sales and the 0:01:03.760 --> 0:01:06.720 other data that we got overnight out of China, not 0:01:06.920 --> 0:01:09.680 great came coming in below estimates and showing a cool 0:01:09.760 --> 0:01:15.240 down even with additional stimulus from the government. Yeah, it's 0:01:15.360 --> 0:01:18.479 um it's a conundrum that's been playing out really for 0:01:19.120 --> 0:01:23.040 pretty much all year to be honestly. So, um, you know, 0:01:23.160 --> 0:01:25.840 some of the regular monthly numbers, like the ones we 0:01:25.920 --> 0:01:29.399 had today that show retail sales really I mean not 0:01:29.720 --> 0:01:31.480 I would say kind of falling off the edge of 0:01:31.520 --> 0:01:34.520 the cliff, but certainly quite weak. And car sales in 0:01:34.680 --> 0:01:38.000 China have been dropping year over year for the last 0:01:38.080 --> 0:01:42.200 five or six months, which is quite unusual. M The 0:01:42.240 --> 0:01:46.120 monthly data which released which came out today for investment 0:01:46.200 --> 0:01:50.680 spending for November is at its lowest levels really in 0:01:50.800 --> 0:01:54.440 terms of growth since two thousand and three. The property 0:01:54.520 --> 0:01:58.160 market is showing kind of mixed signals, but a lot 0:01:58.160 --> 0:02:02.240 of the indicators that will watch about how much floor 0:02:02.240 --> 0:02:05.400 space is being started and how much construction is going 0:02:05.440 --> 0:02:08.880 on are starting to roll over. So yeah, I mean 0:02:08.919 --> 0:02:12.480 this is um, it's becoming quite serious actually because the 0:02:12.520 --> 0:02:17.200 official rhetoric is changing as well about stimulus, and I 0:02:17.240 --> 0:02:19.359 think that's something we're going to watch quite closely over 0:02:19.400 --> 0:02:23.400 the next few weeks. Switching gearge George, a little bit 0:02:23.440 --> 0:02:27.760 to trade. Aside from the immediate political fallout from the 0:02:27.800 --> 0:02:31.720 Huawei arrest for US and China, how material is this 0:02:31.760 --> 0:02:35.840 incident do you believe to us China trade relationship as 0:02:35.880 --> 0:02:42.280 tenures as it may be. How you mean the arrest, Yes, yeah, 0:02:42.320 --> 0:02:46.800 well so far. I think from the Chinese perspective, I 0:02:46.840 --> 0:02:49.560 think they are trying to kind of twin track this, 0:02:49.880 --> 0:02:54.160 which is uh, you know, just to to certainly tell 0:02:54.200 --> 0:02:57.079 the Canadians in no uncertain terms what they think about 0:02:57.320 --> 0:03:00.160 what's just happened. I mean, I think it's interesting at 0:03:00.160 --> 0:03:04.160 their anger has been focused on Canada rather than the 0:03:04.280 --> 0:03:07.480 United States, but they're not very happy about it, as 0:03:07.480 --> 0:03:12.519 you know. And they've also kind of detained two Canadian citizens, 0:03:14.040 --> 0:03:16.519 which looks like a kind of tip for tat kind 0:03:16.520 --> 0:03:19.880 of measure. But at the same time, um, it's interesting 0:03:19.919 --> 0:03:24.040 that they don't really want this trade truce to blow up. 0:03:25.480 --> 0:03:29.360 They have certainly been taking a lot of care to 0:03:29.480 --> 0:03:32.520 try to keep it on track. So their imports of 0:03:32.919 --> 0:03:36.280 American sawyer beans and liquefied natural gas have already kind 0:03:36.320 --> 0:03:41.360 of risen. They've made kind of this offer, which I 0:03:41.360 --> 0:03:44.080 think you've covered in your news package about cutting the 0:03:44.480 --> 0:03:47.720 punitive tariff on American automobile imports back to where it 0:03:47.840 --> 0:03:52.000 was before. And there are other things going on very 0:03:52.080 --> 0:03:56.480 very importantly actually with their industrial strategy called made in China, 0:03:58.560 --> 0:04:00.480 which we may hear a lot more out over the 0:04:00.560 --> 0:04:04.080 next few days and weeks, which which may have substance, 0:04:04.120 --> 0:04:07.080 it may just be optics, but they certainly want to 0:04:07.120 --> 0:04:08.920 try to twin track this, and I don't think the 0:04:09.000 --> 0:04:13.040 arrest of the Huawei kind of CFO is going to 0:04:13.120 --> 0:04:16.000 do well that trade talks for the moment at least, 0:04:16.400 --> 0:04:18.240 you know, Georgia, I kind of want to pair these 0:04:18.279 --> 0:04:20.680 two ideas of the slowing Chinese economy and some of 0:04:20.680 --> 0:04:23.680 the trade tensions. Do you think that all of the 0:04:23.760 --> 0:04:28.279 headlines about trade negotiations between US and China are masking 0:04:28.320 --> 0:04:32.440 the bigger story of China's economy and the failure of 0:04:32.520 --> 0:04:38.560 stimulus to increase growth more well, I think it's um. 0:04:39.320 --> 0:04:41.120 I just think it's in a way, it's a bit 0:04:41.160 --> 0:04:43.719 of an accident, because I think if, if, let's say, 0:04:43.920 --> 0:04:48.039 you know, the the tension between the United States and 0:04:48.120 --> 0:04:51.520 China had broken out last year rather than this year, 0:04:51.600 --> 0:04:53.919 then you know, we wouldn't really at that point, we 0:04:53.920 --> 0:04:57.599 wouldn't really have been talking about the Chinese economy very much, 0:04:57.920 --> 0:05:01.080 because it was it was still kind of responding to 0:05:01.960 --> 0:05:04.159 the kind of stimulus that had previously still been in 0:05:04.160 --> 0:05:06.880 the system, but it has all come together in a 0:05:07.000 --> 0:05:12.240 very untimely way from Beijing's perspective. So the trade the 0:05:12.279 --> 0:05:15.479 impact of the trade tariffs up until now has not 0:05:15.640 --> 0:05:20.280 really been that significant in terms of kind of economic growth, 0:05:20.360 --> 0:05:24.039 and what it has done has been offset really by 0:05:24.080 --> 0:05:27.320 some of the incremental changes which have taken place in 0:05:27.440 --> 0:05:32.279 Chinese monetary policy. But this is why the truth is 0:05:32.320 --> 0:05:36.200 really so valuable to them, because had the tariffs gone 0:05:36.240 --> 0:05:39.760 up from ten to twenty five on the first of January, 0:05:40.160 --> 0:05:43.320 and if President Trump had extended, as he had threatened 0:05:43.360 --> 0:05:46.839 to do, the punitive tariffs to the other half of 0:05:46.880 --> 0:05:50.360 the goods which America imports from China, then by the 0:05:50.480 --> 0:05:52.839 end of two thousand nineteen and certainly in two thousand 0:05:52.839 --> 0:05:55.880 and twenty, we would certainly have seen a much more 0:05:56.320 --> 0:05:59.800 marked impact on what is already a slowing economy. So 0:06:00.520 --> 0:06:04.280 for China it's an aggravation which they don't really need 0:06:04.400 --> 0:06:08.200 and which I think this is why Seeging being probably 0:06:08.240 --> 0:06:12.240 would like to reach some kind of accord if he can, so. 0:06:12.320 --> 0:06:15.279 George just to follow up on that, so I guess 0:06:15.320 --> 0:06:17.840 you you talked about a twin track approach to the 0:06:18.000 --> 0:06:21.400 Huawei incident and others, And so how incentivized do you 0:06:21.440 --> 0:06:25.200 believe China is to negotiate meaningful trade agreements in this 0:06:25.400 --> 0:06:28.960 environment where you know, President Trump has really ratcheted up 0:06:29.600 --> 0:06:34.600 the rhetoric are pretty significantly. Yeah, well, I mean this 0:06:34.680 --> 0:06:38.280 is a moving fast him. I think we're not quite 0:06:38.320 --> 0:06:40.080 sure actually which way this is a game. Because the 0:06:40.880 --> 0:06:44.240 latest kind of thing that I think China watches are 0:06:44.279 --> 0:06:48.320 kind of focused on is really the suggestion, that's all 0:06:48.320 --> 0:06:50.840 it is at this point, but the suggestion that the 0:06:50.960 --> 0:06:56.000 Made in China Industrial Policy, which has been the long 0:06:56.080 --> 0:07:00.400 running store for American businesses in China and European for matter, 0:07:01.560 --> 0:07:04.880 but also for the White House, that there may be 0:07:04.960 --> 0:07:11.560 some flexibility in the China's approach to branding and well 0:07:11.640 --> 0:07:14.440 implementing the policy. Having said that, if it's just a 0:07:14.520 --> 0:07:19.040 question of changing the branding and kind of reformulating the 0:07:19.080 --> 0:07:22.080 strategy that makes it look less threatening, I don't think 0:07:22.120 --> 0:07:25.240 that what will be fooled for one minute. Um, But 0:07:25.360 --> 0:07:29.120 if there is some substance in it, and President Seizing 0:07:29.160 --> 0:07:33.680 things certainly has been minded to respond to criticism at 0:07:33.760 --> 0:07:39.120 home rather than abroad for his approach here to industrial policy, 0:07:39.560 --> 0:07:42.240 then there may be some meat on this. You know, 0:07:42.280 --> 0:07:46.559 there may be reasons to expect this trade, these trade 0:07:46.600 --> 0:07:50.440 talks to actually end up at least partially successful, but 0:07:51.200 --> 0:07:53.400 it's early days. I wouldn't I certainly wouldn't want to 0:07:53.400 --> 0:07:55.560 be drawn on this myself. I mean, I remain rather 0:07:55.640 --> 0:07:59.720 skeptical that that president seizing thing as a closet reformer 0:07:59.760 --> 0:08:04.520 and to kind of change China's technological ambitions. But anyway, 0:08:04.560 --> 0:08:08.120 we shall see before long how this evolves. George Magnus, 0:08:08.160 --> 0:08:09.880 and we will have you back on to discuss it. 0:08:10.000 --> 0:08:13.400 George Magnus, economist and associate at the China Center at 0:08:13.440 --> 0:08:19.760 Oxford University, formerly chief economist at UBS. Talking of China 0:08:19.920 --> 0:08:22.920 and the data that we got out overnight that showed 0:08:23.000 --> 0:08:40.480 a weakening economy as well as trade. In order to 0:08:40.520 --> 0:08:44.280 get some more insight on what Michael Cohen's allegations as 0:08:44.280 --> 0:08:48.080 well as some of President Trump's responses mean for the president, 0:08:48.160 --> 0:08:49.960 I want to bring a Noah Feldman, Professor of law 0:08:50.000 --> 0:08:54.320 at Harvard University, also a Bloomberg Opinion columnist. Noah, thank 0:08:54.320 --> 0:08:55.760 you so much for being with us. You wrote a 0:08:55.800 --> 0:09:00.800 really interesting column analyzing some of President Trump's recent responses. 0:09:00.880 --> 0:09:03.800 To this interview. Can you just lay out what your 0:09:03.800 --> 0:09:08.960 main point was there. Sure, President Trump often tweets stream 0:09:08.960 --> 0:09:11.079 of consciousness, but yesterday was not one of those days. 0:09:11.440 --> 0:09:13.079 His tweet, which sounds a lot like he was written 0:09:13.080 --> 0:09:16.000 with a lawyer at his shoulder, laid out three defenses 0:09:16.880 --> 0:09:19.320 that he has to offer to the charge that he 0:09:19.440 --> 0:09:22.480 is guilty of the felony because he directed Michael Cohen 0:09:22.559 --> 0:09:26.640 to commit a felony of campaign finance violations. No. Uh. 0:09:26.760 --> 0:09:29.040 First of all, thank you so much for writing this column, 0:09:29.080 --> 0:09:32.120 because I find myself I often need help parsing the 0:09:32.120 --> 0:09:35.360 President's tweets and and this column was a big help 0:09:35.400 --> 0:09:38.760 in parsing this morning's um tweets from the president. Can 0:09:38.760 --> 0:09:41.640 you summarize kind of what his defense you think, the 0:09:41.640 --> 0:09:43.680 defense that he is laying out in these tweets, and 0:09:43.679 --> 0:09:46.760 how they, um, you know, kind of really relate to 0:09:46.800 --> 0:09:50.800 what Michael Cohen is saying. Sure, basically what the President 0:09:50.840 --> 0:09:53.400 saying is first of all, Michael Cohen was my lawyer, 0:09:53.679 --> 0:09:56.439 and I told my lawyer to pay off Stormy Daniels, 0:09:56.840 --> 0:09:58.520 and that was legal. It was okay to tell him 0:09:58.559 --> 0:09:59.920 to do that. It's the way he did at the 0:10:00.080 --> 0:10:01.840 was illegal. And what did I know about that he 0:10:01.920 --> 0:10:03.880 was my lawyer and I expected him to do it legally, 0:10:04.440 --> 0:10:06.560 So I may have directed him to pay her off, 0:10:06.640 --> 0:10:10.040 but that shouldn't consider the crime on my side. His 0:10:10.080 --> 0:10:12.760 second defense is if it was a crime, if it 0:10:12.840 --> 0:10:14.840 was a violation of camping and finance violation, it wasn't 0:10:14.840 --> 0:10:16.680 a severe one. And if it wasn't a severe one, 0:10:17.160 --> 0:10:19.680 it should be treated as a civil violation. That is 0:10:19.720 --> 0:10:21.000 to say, you pay a fine, but you don't go 0:10:21.040 --> 0:10:25.120 to prison, not as a criminal one. And his third 0:10:25.280 --> 0:10:28.640 and final, and admittedly a little bit desperate claim is 0:10:28.640 --> 0:10:31.040 that even though Michael Cohen fled guilty to it being 0:10:31.080 --> 0:10:33.560 a crime, Cohen only did that as part of a 0:10:33.559 --> 0:10:35.839 deal with prosecutors and he didn't get any extra jail 0:10:35.880 --> 0:10:39.280 time for that, according to Trump, and therefore that shouldn't 0:10:39.320 --> 0:10:42.200 be weighed as significant in deciding with the president when 0:10:42.200 --> 0:10:44.520 he leads office should be charged facility. Now, what do 0:10:44.520 --> 0:10:46.920 you think President Trump is worried about? I mean, is 0:10:46.920 --> 0:10:49.480 he worried about impeachment? Is he worried about prosecution? What 0:10:49.600 --> 0:10:51.559 is this? What is this responding? I really don't think 0:10:51.600 --> 0:10:53.839 he's worried right now about impeachment in connection with this 0:10:53.880 --> 0:10:56.600 stormy Daniels pay out. I think he believes, and there 0:10:56.640 --> 0:10:58.199 seems to be evidence for this, that his base is 0:10:58.200 --> 0:11:01.240 continuing to support him and the unlikely to be removed 0:11:01.240 --> 0:11:03.160 by the Senate or even impeached by the House for this. 0:11:03.400 --> 0:11:05.240 What he is worried about, and what he should be 0:11:05.280 --> 0:11:07.360 worried about, and what his lawyers must be worried about, 0:11:07.720 --> 0:11:10.200 is it once he's out of office, you know whether 0:11:10.240 --> 0:11:16.040 in twenty five that he's vulnerable to a criminal prosecution 0:11:16.200 --> 0:11:18.440 not brought by Bob Mueller, but bought by the Southern 0:11:18.440 --> 0:11:21.240 District of New York. Because the usual practice is if 0:11:21.240 --> 0:11:22.960 they get so much aslee guilty to a felony and 0:11:22.960 --> 0:11:25.040 that person says I did that the behest of the 0:11:25.120 --> 0:11:27.560 higher up, they then go after the higher up, and 0:11:27.679 --> 0:11:30.920 he's the higher up according to Michael Cohen. Now you know, 0:11:30.960 --> 0:11:33.240 I couldn't find it. I found it. You know, not 0:11:33.360 --> 0:11:37.600 coincidental that the day that Michael Cohen um pled guilty 0:11:37.679 --> 0:11:41.160 that the National Enquirer and his parent company, American Media, 0:11:41.640 --> 0:11:47.839 acknowledged paying off playboy model U Karen McDougall. How significant 0:11:47.960 --> 0:11:50.960 is that piece of news as it relates to the 0:11:51.040 --> 0:11:54.000 President and his legal exposure? Here I think it's actually 0:11:54.000 --> 0:11:57.280 pretty important because what it does is it provides independent 0:11:57.400 --> 0:12:00.320 verification of what Cohen said. In the past. It was 0:12:00.320 --> 0:12:02.600 possible for Trump to say, well, Michael Cohen's a liar, 0:12:02.679 --> 0:12:05.720 this this never happened. But here you have independent sources, 0:12:05.800 --> 0:12:09.040 the directors of the parent company of the National Enquirer, 0:12:09.320 --> 0:12:13.000 who were saying, we also engaged in a parallel, illegal 0:12:13.120 --> 0:12:17.760 campaign finance violation arrangement to pay off McDougal. And so 0:12:18.000 --> 0:12:20.000 that means that it's not all about coming now. It's 0:12:20.040 --> 0:12:24.080 also about another set of witnesses who can testify that 0:12:24.160 --> 0:12:27.200 the president was directly involved in the campaign fence fience violation. 0:12:27.240 --> 0:12:30.720 That counts as a selony. Professor Elman, I gotta be honest. 0:12:30.720 --> 0:12:32.640 When I talked to a lot of market participants, they say, 0:12:32.640 --> 0:12:35.800 we're growing numb to the president Trump news and or 0:12:35.960 --> 0:12:38.719 to everything that's coming out. It comes fast and furious 0:12:38.760 --> 0:12:40.920 and more sensational, and we just don't care because the 0:12:40.920 --> 0:12:44.200 economy is doing just fine. So I'm just wondering, is 0:12:44.280 --> 0:12:47.720 this different or is this just more pile on that's 0:12:47.720 --> 0:12:50.199 not going to really essentially amount to anything with respect 0:12:50.280 --> 0:12:54.920 to his presidency or anything else. Well, it depends on 0:12:55.040 --> 0:12:58.040 whether you think that a president who seriously realizes that 0:12:58.120 --> 0:13:01.440 he may face criminal indict is going to govern differently. 0:13:02.120 --> 0:13:04.200 And my own view is that, although it's not the 0:13:04.240 --> 0:13:07.640 easiest thing to quantify, a president who's walking around thinking 0:13:07.679 --> 0:13:09.360 that prosecutors are going to charge in the day you 0:13:09.440 --> 0:13:11.520 leaves office is going to be effected in how he 0:13:11.559 --> 0:13:13.960 does things. He's going to have to be more cautious 0:13:13.960 --> 0:13:15.360 on a range of things. He's gonna have to be 0:13:15.440 --> 0:13:19.360 more focused on protecting himself. He may be tempted to 0:13:19.440 --> 0:13:22.040 use the part in power in ways that create backlash. 0:13:22.520 --> 0:13:26.040 So you know, I understand the sense of, oh, my goodness, 0:13:26.080 --> 0:13:29.640 not another story, and that's an understandable sensation, But from 0:13:29.640 --> 0:13:32.280 the standpoint of the future of the Republican in the 0:13:32.320 --> 0:13:33.679 next two or two and a half years, I think 0:13:33.720 --> 0:13:36.680 this is actually pretty significant. Real quickly, professor, what do 0:13:36.720 --> 0:13:39.160 you think prosecutors will do here at this defense that 0:13:39.200 --> 0:13:42.240 you kind of summarized here um is incredible, and what 0:13:42.280 --> 0:13:46.200 do you think prosecutors ultimately do well? I think as 0:13:46.200 --> 0:13:48.720 a legal defense, what the president suggests me is not 0:13:48.840 --> 0:13:51.200 especially credible. I don't think he would save him from 0:13:51.200 --> 0:13:54.400 being convicted. What's interesting is whether it would lead prosecutors 0:13:54.400 --> 0:13:56.839 to say, well, you know what, we're not going to 0:13:56.920 --> 0:13:59.319 go after him criminally. We'll just try to hit him 0:13:59.320 --> 0:14:01.079 with a civil ye lation. And I think a lot 0:14:01.120 --> 0:14:03.319 of that would depend on who was the president and 0:14:03.320 --> 0:14:06.280 who was running the Department of Justice after his presence 0:14:06.280 --> 0:14:09.280 he was over. You can easily imagine a Democrat saying, 0:14:09.320 --> 0:14:11.560 you know, let's who's become president thing, let's put this 0:14:11.600 --> 0:14:14.319 to bed. Let's see if there's any reasonable way we 0:14:14.360 --> 0:14:16.320 can avoid charging a president with a crime. And in 0:14:16.559 --> 0:14:19.280 those circumstances, they would probably get away with it. Noah Feldman, 0:14:19.320 --> 0:14:20.960 thank you so much for being with us. Noah Feldman, 0:14:21.000 --> 0:14:25.160 Professor of Law at Harvard University, also a Bloomberg Opinion calumnist, 0:14:25.240 --> 0:14:28.280 speaking to myself and Paul Sweeney filling in for Pim Fox. 0:14:28.320 --> 0:14:31.720 Paul Sweeney, head of North American Research for Bloomberg Intelligence. 0:14:47.320 --> 0:14:50.120 Joined by Paul Sweeney filling in for Pim Fox. Paul Sweeney, 0:14:50.160 --> 0:14:52.120 of course, is the head of North American Research at 0:14:52.120 --> 0:14:55.120 Bloomberg Intelligence. And we were just speaking with a futurist 0:14:55.200 --> 0:14:57.840 for the car industry. Let's now speak to a futurist 0:14:57.880 --> 0:15:00.720 for the fixed income industry. Kathleen Gaffney, who I'm sure 0:15:00.760 --> 0:15:02.600 it is so excited to look into her crystal ball 0:15:02.680 --> 0:15:05.680 for us CO, director of Diversified Fixed Income at Eaton Vans, 0:15:05.720 --> 0:15:10.200 overseeing helping to oversee four billion dollars of assets and 0:15:10.240 --> 0:15:13.920 based in Boston. She joins US here in eleven three studios. So, Kathleen, 0:15:14.000 --> 0:15:16.440 for next year, we saw a pretty rough year this 0:15:16.520 --> 0:15:20.360 year for investment grade, credit, great year for cash. Next year, 0:15:20.560 --> 0:15:22.160 what will be the best performer and what will be 0:15:22.160 --> 0:15:25.600 the worst performer? And credit? We'll pull out that crystal ball. 0:15:25.720 --> 0:15:30.240 Come on, you can do it. It's getting it's getting 0:15:30.360 --> 0:15:35.160 a lot trickier right now. But I do think that 0:15:35.240 --> 0:15:39.120 the most important lever in fixed income for next year 0:15:39.320 --> 0:15:43.320 is going to be, uh, the dollar a week dollar 0:15:44.040 --> 0:15:48.720 and the currencies that perform better relative will be what 0:15:48.920 --> 0:15:53.440 saves performance for the year. So as you think about 0:15:53.560 --> 0:15:56.080 let's let's bring the FED into this, I mean, what 0:15:56.240 --> 0:16:00.200 is your outlook for rates? And maybe you know give 0:16:00.240 --> 0:16:02.760 us your out look for if you want to go 0:16:02.800 --> 0:16:10.200 that far, how about I did say futurist um. There 0:16:10.240 --> 0:16:14.320 you go. I think obviously rates are going to go higher. 0:16:14.360 --> 0:16:16.920 But what's getting tricky right now is the amount of 0:16:17.040 --> 0:16:20.280 uncertainty that's weighing on the market makes that a very 0:16:20.320 --> 0:16:25.440 difficult call. Uh, they should move up a little bit, 0:16:26.000 --> 0:16:30.920 but given the amount of uncertainty, I'm less certain that 0:16:31.000 --> 0:16:34.360 there's going to be a big move. Um. A weaker 0:16:34.480 --> 0:16:37.840 dollar is going to be a big part of keeping 0:16:37.880 --> 0:16:40.600 growth going. I think that's what the FED has really 0:16:40.600 --> 0:16:43.560 been focused on. So in week dollar that means emerging 0:16:43.560 --> 0:16:46.040 markets out before. I mean, that's sort of the implication here, 0:16:46.040 --> 0:16:48.600 and I'm just wondering how does that play into the 0:16:48.640 --> 0:16:52.360 global economic slowdown that we're seeing, Because usually e M 0:16:52.640 --> 0:16:55.840 gets the flu when developed markets get a cold, and 0:16:55.880 --> 0:16:57.560 it seems like develop markets are getting a little bit 0:16:57.560 --> 0:17:01.200 of a cold. They definitely are, but I think there's 0:17:01.360 --> 0:17:05.800 much too much pessimism out there. It feels a little 0:17:05.800 --> 0:17:12.119 bit like once again, um really yeah really, but like 0:17:12.240 --> 0:17:14.200 this time around is a little bit different because central 0:17:14.240 --> 0:17:19.600 banks are actually withdrawing stimulus, they are making it less accommodative. 0:17:20.520 --> 0:17:24.400 It's still a very low interest rate environment, and if 0:17:24.400 --> 0:17:28.240 they're not going to move up quickly, there's just enough 0:17:28.280 --> 0:17:33.280 to go around. China UH is definitely slowing and that's 0:17:33.400 --> 0:17:38.119 impacting the trade tensions in probably a positive way, at 0:17:38.200 --> 0:17:41.800 least in the short term. That's what I mean about tricky. 0:17:41.840 --> 0:17:46.720 Everything in the short term is different for the long term. Uh. 0:17:46.760 --> 0:17:50.280 And there are enough things that are causing a slow down, 0:17:50.760 --> 0:17:55.439 but enough things that will keep everything just right. But 0:17:55.560 --> 0:18:00.760 you still don't have enough value in the fixed income 0:18:00.800 --> 0:18:04.880 markets in the developed world, rates, the rate markets and 0:18:04.920 --> 0:18:07.840 credit are still not cheap enough, and they may not 0:18:08.480 --> 0:18:11.720 cheapen up and up enough. But if the economy is 0:18:11.720 --> 0:18:16.120 going to keep going, and if the central banks are 0:18:16.720 --> 0:18:21.679 more dovish right now, that's what will weaken the dollar 0:18:22.040 --> 0:18:24.720 and that will get things going again. So you mentioned 0:18:24.920 --> 0:18:28.240 the markets being tricky. Does that mean volatile because the 0:18:28.280 --> 0:18:32.080 volatility this market, I know has been unnerving for many 0:18:32.119 --> 0:18:35.000 What is your expectation for the level of volatility in 0:18:35.000 --> 0:18:36.879 this market as we look into next year. It's going 0:18:36.960 --> 0:18:40.560 to continue to be high. I I believe that the 0:18:40.600 --> 0:18:44.600 hardest part of transitioning from a secular decline to a 0:18:44.680 --> 0:18:49.679 secular rise is this near term getting back to normal 0:18:49.800 --> 0:18:52.800 off the zero bound. Once we get through a full 0:18:52.880 --> 0:18:57.399 cycle and we're back to normal, then it becomes normal cycles. 0:18:57.680 --> 0:18:59.680 But this is going to be challenging, and a lot 0:18:59.720 --> 0:19:03.320 of that is due to We're transitioning from monetary policy 0:19:03.400 --> 0:19:07.919 to fiscal policy, and it's very difficult to read the 0:19:07.960 --> 0:19:12.520 politicians from the developed markets to the emerging markets. It 0:19:12.600 --> 0:19:16.840 has been so almost almost easy to listen to the 0:19:16.880 --> 0:19:20.399 central bankers, and it's either a risk off day or 0:19:20.440 --> 0:19:23.120 a risk on day, and then you know what to do. 0:19:23.119 --> 0:19:26.800 Do we take more risk or reduce risk? This is 0:19:26.920 --> 0:19:30.959 far trickier. Lots of different things going on all right, 0:19:31.080 --> 0:19:33.639 leverage loans. We've heard a lot about the souring of 0:19:33.720 --> 0:19:36.480 leverage loans. How this is armageddon. This is the epicenter 0:19:36.560 --> 0:19:39.480 of everything going south. Are you seeing opportunities at this 0:19:39.520 --> 0:19:41.639 point has been oversold or do you think that this 0:19:41.720 --> 0:19:45.439 is an area of more pain to come. I'm not 0:19:45.480 --> 0:19:48.720 a big believer in chasing yield spread for spread sake. 0:19:48.800 --> 0:19:51.200 It's all relative. I believe you want to look for 0:19:51.280 --> 0:19:56.080 good total return. Loans have cheapened a bit with the concerns, 0:19:56.720 --> 0:19:59.960 but not enough. As a total return investor, I think 0:20:00.119 --> 0:20:03.480 they're going to be incredibly important in the years ahead 0:20:04.160 --> 0:20:10.960 because there will be a much uh more integrated market 0:20:11.080 --> 0:20:14.720 in high yield, between loans and high yield. I'm gonna 0:20:14.760 --> 0:20:16.159 put you on the spot here, do you think the 0:20:16.200 --> 0:20:18.320 banks are going to suffer big losses due to hung 0:20:18.359 --> 0:20:21.520 Bridge loans are basically loans that they've extended to private 0:20:21.560 --> 0:20:24.200 equity firms for buyouts that they now have to sell 0:20:24.240 --> 0:20:29.159 into a market that's deteriorating. It is deteriorating, but not 0:20:29.400 --> 0:20:33.880 enough at this point. Um the supply demand is in balance. 0:20:34.200 --> 0:20:38.840 When that shifts, the prices that are attractive for a 0:20:38.840 --> 0:20:42.800 total return investor will come back. We're not there yet. 0:20:43.400 --> 0:20:44.960 I think we had a yeah, Earli in the show. 0:20:44.960 --> 0:20:48.480 We had the CEO of a home builder, Taylor Marson, 0:20:49.000 --> 0:20:52.080 on the show, just talking about the home market here 0:20:52.080 --> 0:20:55.040 in the US. How do you guys think about that sector? 0:20:55.280 --> 0:20:57.880 You know, giving that interest rates rising a little bit? 0:20:57.880 --> 0:20:59.280 Are do you have any exposure there? What are you 0:20:59.320 --> 0:21:02.080 looking to do? We do have some small exposure. It's 0:21:02.160 --> 0:21:07.880 been uh challenging to find uh homebuilder credits that are 0:21:07.960 --> 0:21:10.600 cheap enough. Most of them are below investment grade but 0:21:10.800 --> 0:21:15.800 still higher quality high yield double b um. But there 0:21:15.800 --> 0:21:19.639 are a few on on the edge of investment grade 0:21:20.000 --> 0:21:23.240 that do look attractive because they cheapened up. Was everyone 0:21:23.280 --> 0:21:26.560 worried about rates moving higher now that they're taking a 0:21:26.560 --> 0:21:31.720 more gradual path uh. And I believe with wages rising 0:21:31.960 --> 0:21:37.000 and that pent up demand from millennials um my own 0:21:37.080 --> 0:21:41.560 children is going to foster that demand. So we're comfortable 0:21:41.760 --> 0:21:45.280 with home builders next year, which which as a class 0:21:45.280 --> 0:21:51.960 will perform high yield or investment grade. It's a tough 0:21:52.280 --> 0:21:58.639 call between those two. I'm gonna say potentially high yield 0:21:58.680 --> 0:22:02.400 if rates don't if rates just move up gradually because 0:22:02.400 --> 0:22:06.040 we're not gonna get that default cycle yet, right. And 0:22:05.359 --> 0:22:11.800 the pressures in investment grade with triple bees uh, create 0:22:12.000 --> 0:22:15.680 enough idiosyncratic risk throughout the year, which will be good 0:22:15.720 --> 0:22:19.080 pickings for just the right names. Kathleen Gaffney. Always a 0:22:19.080 --> 0:22:21.720 pleasure having you. We love having you here. Kathleen Gaffney 0:22:21.760 --> 0:22:38.520 is co director of Diversified Fixed Income four Eaton Vance. Paul, 0:22:38.520 --> 0:22:42.960 our next guest has the most amazing job title. Yeah, 0:22:43.119 --> 0:22:46.399 very cool. To be a futurist, Yeah, and to be 0:22:46.440 --> 0:22:50.080 a future setting card company, pretty amazing. Cheryl Connolly, futurist 0:22:50.560 --> 0:22:54.639 at Ford Motor Company. Cheryl, what is a futurist? So, 0:22:54.760 --> 0:22:57.280 the futurist is somebody who helps an organization to long 0:22:57.359 --> 0:23:00.400 term planning thinking strategy so that they can get ahead 0:23:00.400 --> 0:23:02.920 of the marketplace, and in the auto industry that's particularly 0:23:02.960 --> 0:23:05.760 important because it takes about three years to come up 0:23:05.800 --> 0:23:09.160 with a concept and actually have it hit the road. Cheryl, 0:23:09.240 --> 0:23:11.159 you know, it's it's interesting. I've been going to the 0:23:11.160 --> 0:23:13.960 Consumer Electronics Show in Las Vegas, uh, you know, where 0:23:13.960 --> 0:23:16.320 they highlight all the cool new technologies and gadgets for 0:23:16.320 --> 0:23:18.880 about thirty years, and I've noticed over the last five 0:23:18.880 --> 0:23:21.760 to seven years that the electronics show has really become 0:23:21.840 --> 0:23:24.480 an auto show where the auto companies take up about 0:23:24.600 --> 0:23:27.280 half of the floor space. It's just amazing to see 0:23:27.320 --> 0:23:30.520 how tech is really front and center in the car business. 0:23:30.560 --> 0:23:33.160 So you know, at Ford, what are the top tech 0:23:33.240 --> 0:23:35.920 priorities or opportunities for you guys, And you know where's 0:23:35.960 --> 0:23:39.280 forward putting its money as it thinks, uh, several years out. Well, 0:23:39.320 --> 0:23:41.679 it's interesting that you mentioned see yes, because Ford actually 0:23:41.680 --> 0:23:45.560 was the first automaker to uh show there, and it 0:23:45.640 --> 0:23:48.520 was in recognition that a car isn't just a car anymore. 0:23:48.600 --> 0:23:52.040 It is a complex collection of computers. I mean back 0:23:52.080 --> 0:23:54.639 in the day, my dad, your grandfather, like a tinker 0:23:54.680 --> 0:23:56.760