1 00:00:00,320 --> 00:00:04,160 Speaker 1: Who you put your trust in matters. Investors have put 2 00:00:04,200 --> 00:00:07,640 Speaker 1: their trust in independent registered investment advisors to the tune 3 00:00:07,640 --> 00:00:12,240 Speaker 1: of four trillion dollars. Why learn more and find your 4 00:00:12,280 --> 00:00:27,240 Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:27,320 --> 00:00:31,320 Speaker 1: I'm Tom Keane. Always with Michael McKee. Daily we bring 6 00:00:31,360 --> 00:00:35,280 Speaker 1: you insight from the best in economics, finance, investment and 7 00:00:35,360 --> 00:00:41,519 Speaker 1: international relations. Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, 8 00:00:41,560 --> 00:00:48,280 Speaker 1: and of course on the Bloomberg. It is a thrill 9 00:00:48,360 --> 00:00:51,760 Speaker 1: to have with us today. David Malpass of m Global. 10 00:00:52,200 --> 00:00:55,280 Speaker 1: We can talk of economics. We can talk of the 11 00:00:55,400 --> 00:00:57,639 Speaker 1: kind of economics he and I hear at the Economic 12 00:00:57,680 --> 00:01:01,480 Speaker 1: Club of New York, but we must talk today about 13 00:01:01,520 --> 00:01:06,120 Speaker 1: our economic politics. Is Mr mel Pass, a longtime Republican, 14 00:01:06,480 --> 00:01:11,560 Speaker 1: has agreed to join the economic advisory of Mr Donald Trump? 15 00:01:11,680 --> 00:01:14,480 Speaker 1: What exactly are you doing? Are you doing white papers 16 00:01:14,480 --> 00:01:17,039 Speaker 1: that no one reads in the Trump campaign? What do 17 00:01:17,080 --> 00:01:20,560 Speaker 1: you actually do? Hi? Tim, Good morning. Um. There's not 18 00:01:20,640 --> 00:01:22,680 Speaker 1: a lot of white papers going What there are is 19 00:01:22,800 --> 00:01:26,720 Speaker 1: policy development papers. So you have to think about as 20 00:01:26,959 --> 00:01:29,440 Speaker 1: as you go forward with a tax plan, what are 21 00:01:29,480 --> 00:01:32,560 Speaker 1: the details As you think about regulatory reform. I've been 22 00:01:32,680 --> 00:01:36,840 Speaker 1: working some on that, and regulatory reform is a is 23 00:01:36,880 --> 00:01:40,480 Speaker 1: a giant project. The government has been putting out huge 24 00:01:40,640 --> 00:01:45,319 Speaker 1: numbers of regulations that then stop small business from hiring people. 25 00:01:45,560 --> 00:01:47,319 Speaker 1: And so how do you get out of that. It's 26 00:01:47,360 --> 00:01:50,600 Speaker 1: harder than it sounds. You know. The economic policy of 27 00:01:50,680 --> 00:01:54,800 Speaker 1: your grand beleaguered party is Mr Trump's economic in the 28 00:01:54,960 --> 00:02:00,640 Speaker 1: vicinity of Speaker Ryan's economics. Absolutely at Bill on the 29 00:02:00,720 --> 00:02:04,400 Speaker 1: need for growth, for a reasonable tax code, everybody in 30 00:02:04,400 --> 00:02:06,400 Speaker 1: the Republican tax code for the rich. Come on, the 31 00:02:06,440 --> 00:02:10,280 Speaker 1: guy surrounded by billionaires in the ramp, obviously from Secretary Clinton, 32 00:02:10,639 --> 00:02:13,160 Speaker 1: is it's a Trump code for the rich. Push back, right, 33 00:02:13,280 --> 00:02:15,920 Speaker 1: she's saying that, But really he's cutting rates really on 34 00:02:16,120 --> 00:02:20,160 Speaker 1: small businesses. On the corporate tax rate US is the 35 00:02:20,240 --> 00:02:22,520 Speaker 1: highest in the world, and all of the studies show 36 00:02:22,800 --> 00:02:26,240 Speaker 1: that the incidents of that tax rate falls on workers. 37 00:02:26,520 --> 00:02:29,680 Speaker 1: And so the goal here, we know the facts. Real 38 00:02:29,800 --> 00:02:34,320 Speaker 1: median income has been going down in this recovery that's unprecedented, 39 00:02:34,480 --> 00:02:37,240 Speaker 1: and so this is a really and we know it's 40 00:02:37,280 --> 00:02:43,680 Speaker 1: the weakest recovery since so the current policies are absolutely harmful. 41 00:02:43,960 --> 00:02:47,320 Speaker 1: We know that because we see the results. So you've 42 00:02:47,320 --> 00:02:50,320 Speaker 1: got to propose changes. Hillary Clinton is not doing that. 43 00:02:50,560 --> 00:02:53,240 Speaker 1: Donald Trump is doing that, and as you go forward, 44 00:02:53,440 --> 00:02:56,880 Speaker 1: you'll make the changes work. One is on taxes, one 45 00:02:57,000 --> 00:03:00,320 Speaker 1: is on regulatory policy. You've got to change health policy, 46 00:03:00,520 --> 00:03:04,200 Speaker 1: immigration policy, trade policy, and down the line. Let's bring 47 00:03:04,240 --> 00:03:08,160 Speaker 1: in Michael McKee and Southern Monton. Michael, Good morning, David. 48 00:03:08,320 --> 00:03:12,119 Speaker 1: I would point out that you're wrong. It's not unprecedented 49 00:03:12,200 --> 00:03:14,639 Speaker 1: that median incomes are going down. They've been going down 50 00:03:14,639 --> 00:03:18,520 Speaker 1: since the George H. W. Bush administration. So it's got 51 00:03:18,520 --> 00:03:23,200 Speaker 1: a bigger than just to call it up. Can call 52 00:03:23,200 --> 00:03:25,960 Speaker 1: it up all he's computed. Tom can call it up 53 00:03:25,960 --> 00:03:28,079 Speaker 1: on the Bloomberg. But if you look up medium and 54 00:03:28,120 --> 00:03:32,200 Speaker 1: income since they've been going down. So I'm wondering, you 55 00:03:32,240 --> 00:03:37,200 Speaker 1: know how, why you think they're going down. You're blaming 56 00:03:37,240 --> 00:03:39,480 Speaker 1: the Obama administration when it's clearly not. Damn, it's a 57 00:03:39,480 --> 00:03:42,200 Speaker 1: long term historical trend. So how do you fix it 58 00:03:42,240 --> 00:03:45,680 Speaker 1: if you're if you don't have a proper diagnosis, Well, 59 00:03:45,760 --> 00:03:47,240 Speaker 1: I don't think you can if you don't have a 60 00:03:47,240 --> 00:03:50,320 Speaker 1: proper diagnosis. So the diagnosis that I want to lay 61 00:03:50,320 --> 00:03:53,240 Speaker 1: out for you is in two thousand nine, two thousand 62 00:03:53,240 --> 00:03:56,360 Speaker 1: and ten eleven, UH, that we had an administration that 63 00:03:56,400 --> 00:04:00,240 Speaker 1: talked constantly about the need for tax increases, particularly early 64 00:04:00,280 --> 00:04:04,080 Speaker 1: on businesses. Hillary Clinton even today is proposing to four 65 00:04:04,120 --> 00:04:08,560 Speaker 1: percent surtax that would extend to successful small businesses, so 66 00:04:08,640 --> 00:04:11,920 Speaker 1: that stops in business investment. So what we've seen since 67 00:04:12,160 --> 00:04:16,920 Speaker 1: two thousand and ten is remarkably low levels of business investment. 68 00:04:17,240 --> 00:04:19,920 Speaker 1: That's stopping the economy from growing. As you know, I've 69 00:04:20,120 --> 00:04:22,920 Speaker 1: I've talked about the problems that the Federal Reserve is 70 00:04:23,080 --> 00:04:27,479 Speaker 1: buying bonds uh and and that just benefits people who 71 00:04:27,520 --> 00:04:31,360 Speaker 1: issue bonds. So you've had this huge polarization of the 72 00:04:31,760 --> 00:04:34,840 Speaker 1: the economy in terms of income, with the income going 73 00:04:34,880 --> 00:04:37,600 Speaker 1: to rich people and not going to the middle class. 74 00:04:37,680 --> 00:04:40,760 Speaker 1: That would change under a Trump presidency. The big question 75 00:04:40,800 --> 00:04:44,680 Speaker 1: everybody has about Trump's economic plan, to the extent that 76 00:04:44,720 --> 00:04:47,920 Speaker 1: there is one one can decipher, is that he blows 77 00:04:47,920 --> 00:04:50,880 Speaker 1: a hole in the deficit anywhere between six and ten 78 00:04:50,960 --> 00:04:54,560 Speaker 1: trillion dollars. He's refused to raise taxes, So how do 79 00:04:54,560 --> 00:04:56,640 Speaker 1: you cover that hole? Yeah, you know a lot of 80 00:04:56,640 --> 00:04:59,760 Speaker 1: those studies that we see are people that make wilders, 81 00:04:59,760 --> 00:05:03,680 Speaker 1: some sins. We were on TV Minutes ago, and I said, 82 00:05:03,920 --> 00:05:07,320 Speaker 1: if if you assume that Trump doesn't cause business investment, 83 00:05:07,560 --> 00:05:09,880 Speaker 1: then you're going to get a bad number from his program. 84 00:05:09,920 --> 00:05:12,520 Speaker 1: The whole point of the program is to get businesses 85 00:05:12,560 --> 00:05:15,360 Speaker 1: to invest again and higher workers. So if you assume 86 00:05:15,440 --> 00:05:18,520 Speaker 1: that that doesn't happen, then you're gonna blow the deficit. 87 00:05:19,000 --> 00:05:21,640 Speaker 1: What what I think will happen is you'll get lots 88 00:05:21,680 --> 00:05:25,440 Speaker 1: more growth, more business investment, and that you you will 89 00:05:25,600 --> 00:05:30,800 Speaker 1: have a uh fiscal accounts for the federal government that 90 00:05:30,839 --> 00:05:33,159 Speaker 1: are in much better shape than they are now. CBO 91 00:05:33,320 --> 00:05:37,080 Speaker 1: came out with their midterm yesterday and they're showing nearly 92 00:05:37,160 --> 00:05:39,800 Speaker 1: a trillion dollars per year. It's it's a hundred and 93 00:05:39,800 --> 00:05:43,600 Speaker 1: fifty billion per year added average to the fiscal deficit. 94 00:05:44,000 --> 00:05:47,760 Speaker 1: And that's under current policies, which they're basically saying they 95 00:05:47,760 --> 00:05:51,520 Speaker 1: don't work. The polls of the polls, whether it's popular, voter, electoral, 96 00:05:51,600 --> 00:05:53,320 Speaker 1: we can argue all day about that. And I know 97 00:05:53,400 --> 00:05:57,960 Speaker 1: it's early before Labor Day. In the Dashed November David 98 00:05:58,000 --> 00:06:01,760 Speaker 1: Meyl passed the fact is Governor Romney was not trounced, 99 00:06:01,960 --> 00:06:08,080 Speaker 1: but was defeated in the second Obama election. And now 100 00:06:08,120 --> 00:06:12,320 Speaker 1: we have Mr Trump struggling in key battleground states. What 101 00:06:12,480 --> 00:06:16,560 Speaker 1: is it about the GOP where they can't resonate to 102 00:06:16,720 --> 00:06:21,640 Speaker 1: get to a good political outcome? Is it their economics. 103 00:06:22,320 --> 00:06:24,520 Speaker 1: I don't think it's the economics. I think it's how 104 00:06:24,560 --> 00:06:29,320 Speaker 1: you explain things. So Governor Romney didn't explain things in 105 00:06:29,360 --> 00:06:33,880 Speaker 1: a way that was attracted to the worker. Trump is 106 00:06:33,920 --> 00:06:39,320 Speaker 1: obviously very important of a popular with average workers. Uh. 107 00:06:39,320 --> 00:06:43,159 Speaker 1: And so that's a completely different dynamic from what Romney had. 108 00:06:43,360 --> 00:06:45,359 Speaker 1: We've got to see how many votes it is. But 109 00:06:45,440 --> 00:06:49,320 Speaker 1: he's proposing quite a different way of raising the middle 110 00:06:49,400 --> 00:06:54,080 Speaker 1: class is critical. I'll take your point of average workers. 111 00:06:54,440 --> 00:06:57,279 Speaker 1: But the fact is on the way through Twitter and 112 00:06:57,360 --> 00:07:02,240 Speaker 1: through outlandish comments, he's oust sized himself and David Meyl 113 00:07:02,320 --> 00:07:05,640 Speaker 1: passed his party from to be clicked to be kind 114 00:07:05,680 --> 00:07:09,960 Speaker 1: about it, Brown America. How does he flip flop back 115 00:07:10,400 --> 00:07:14,480 Speaker 1: to getting marginal disaffected worker votes. He needs to do 116 00:07:14,560 --> 00:07:18,720 Speaker 1: that like this week, exactly right. And that means new language, 117 00:07:18,760 --> 00:07:21,440 Speaker 1: new ways to explain things. Uh. That you know, it 118 00:07:21,560 --> 00:07:23,920 Speaker 1: was a very hard fought primary, so you've got to 119 00:07:23,960 --> 00:07:26,760 Speaker 1: recognize that that's over and you're going into the general 120 00:07:26,760 --> 00:07:30,840 Speaker 1: election appealing to a broad based appealing to Democrats. He's 121 00:07:30,880 --> 00:07:34,000 Speaker 1: trying to do that explicitly now by saying you're gonna 122 00:07:34,040 --> 00:07:36,720 Speaker 1: be safer, you're gonna grow faster, your children are going 123 00:07:36,800 --> 00:07:39,000 Speaker 1: to have a better chance at a job than under 124 00:07:39,080 --> 00:07:42,040 Speaker 1: Hillary Clinton. And that should speak to a lot of voters. 125 00:07:43,040 --> 00:07:46,960 Speaker 1: But Donald Trump has also said deport eleven million people, uh, 126 00:07:47,160 --> 00:07:52,080 Speaker 1: block immigration from much of the world, uh, and has 127 00:07:52,160 --> 00:07:55,920 Speaker 1: been characterized by many in the community. Tom has talked 128 00:07:55,960 --> 00:07:59,880 Speaker 1: about as racist as someone who is advising him, do 129 00:08:00,040 --> 00:08:02,600 Speaker 1: you own that as well? How can you do that? 130 00:08:03,400 --> 00:08:08,680 Speaker 1: How can you advise somebody who who speaks like that. Uh? Well, Michael, 131 00:08:08,840 --> 00:08:12,520 Speaker 1: as you know, I've had a long career that's been 132 00:08:12,840 --> 00:08:17,240 Speaker 1: been very consistent about wanting everyone's meeting to come to 133 00:08:17,320 --> 00:08:20,120 Speaker 1: go up. That's what I did in the Treasury Department, 134 00:08:20,160 --> 00:08:23,360 Speaker 1: at the State Department for all the world, for Latin America, 135 00:08:23,440 --> 00:08:26,160 Speaker 1: for Africa, for Asia. I want to see people's real 136 00:08:26,280 --> 00:08:29,760 Speaker 1: median income go up. And that's the opposite of racism. 137 00:08:29,800 --> 00:08:33,160 Speaker 1: That's that is the core of how you get prosperity 138 00:08:33,240 --> 00:08:38,280 Speaker 1: and global uh progress. And and what Trump has pointed 139 00:08:38,280 --> 00:08:41,600 Speaker 1: out is the trade policies and the immigration policies that 140 00:08:41,679 --> 00:08:45,800 Speaker 1: are not being enforced right now. UH is a mistake 141 00:08:45,880 --> 00:08:48,680 Speaker 1: for the US. We've got to enforce the laws, do 142 00:08:48,760 --> 00:08:51,480 Speaker 1: it in a humane way. On the trade front, we've 143 00:08:51,520 --> 00:08:55,400 Speaker 1: got to have better negotiations right now, the negotiations aren't 144 00:08:55,440 --> 00:08:59,120 Speaker 1: working for the American Should you convince Mr Trump is 145 00:09:00,120 --> 00:09:02,320 Speaker 1: what many would consider Mr Bell has to be the 146 00:09:02,360 --> 00:09:05,880 Speaker 1: same voice of his economic policy. Can you convince him 147 00:09:05,920 --> 00:09:09,280 Speaker 1: to flip and support t p P no. And look, 148 00:09:09,720 --> 00:09:12,040 Speaker 1: even you don't want to support tp NO, and I've 149 00:09:12,080 --> 00:09:15,439 Speaker 1: written I've written against it for years. TPP became this 150 00:09:15,640 --> 00:09:19,040 Speaker 1: giant foreign policy initiative of the U. S as a 151 00:09:19,040 --> 00:09:21,400 Speaker 1: as a as a way to try to support Japan 152 00:09:21,559 --> 00:09:27,640 Speaker 1: our ally, we had a very complex trade negotiation that 153 00:09:27,720 --> 00:09:32,400 Speaker 1: wouldn't have worked for the American worker. And even Clinton 154 00:09:32,520 --> 00:09:34,559 Speaker 1: is saying she's not going to support it, but she'll 155 00:09:34,559 --> 00:09:37,720 Speaker 1: flip flop. That doesn't make sense. David, you and gender 156 00:09:37,840 --> 00:09:40,520 Speaker 1: email like you're on the new You pull the microphone 157 00:09:40,559 --> 00:09:45,480 Speaker 1: close to you. I know, David, your first time on radio. 158 00:09:45,520 --> 00:09:48,920 Speaker 1: Many people would say, David mel pass and Mr Trump 159 00:09:48,960 --> 00:09:52,440 Speaker 1: is surrounded by nice, swell guys who he knows from 160 00:09:52,520 --> 00:09:56,640 Speaker 1: real estate. That is not you. You support a Republican 161 00:09:57,200 --> 00:10:03,440 Speaker 1: economics and a Republican ethos in politics, win or lose? 162 00:10:04,120 --> 00:10:09,199 Speaker 1: What does your party do the fourth Wednesday of November, Tom, 163 00:10:09,360 --> 00:10:11,559 Speaker 1: What I think we have to have is really a 164 00:10:11,600 --> 00:10:14,480 Speaker 1: new vision of how to create growth and how to 165 00:10:14,559 --> 00:10:18,760 Speaker 1: get change going on. The Republican Party has been in 166 00:10:19,640 --> 00:10:22,360 Speaker 1: and out of power for a long time and hasn't 167 00:10:22,760 --> 00:10:26,120 Speaker 1: maybe taken care of the special interests as much and 168 00:10:26,280 --> 00:10:30,120 Speaker 1: of the of the of the growth message. Maybe part 169 00:10:30,200 --> 00:10:32,480 Speaker 1: of it is they've got the right message but aren't 170 00:10:32,520 --> 00:10:35,080 Speaker 1: winning enough. So one of the things Trump is saying 171 00:10:35,120 --> 00:10:37,880 Speaker 1: is I'm actually gonna do it if you if you 172 00:10:37,960 --> 00:10:41,600 Speaker 1: make me president, I'm going to cause growth origented change. 173 00:10:41,679 --> 00:10:44,920 Speaker 1: That's what I want. I don't want to predict the election, 174 00:10:45,640 --> 00:10:48,480 Speaker 1: but if I may assume someone will lose the election, 175 00:10:49,040 --> 00:10:52,120 Speaker 1: and let's assume that's Mr Trump for the sake of discussion, 176 00:10:53,120 --> 00:10:56,319 Speaker 1: how do you pick up the pieces of your repart 177 00:10:56,480 --> 00:11:03,520 Speaker 1: your party economically? Given the polarity racially of the present debate, 178 00:11:04,720 --> 00:11:08,640 Speaker 1: how do you reach out to Latinos and blacks? I 179 00:11:08,640 --> 00:11:10,600 Speaker 1: think a very hard part of it is how do 180 00:11:10,640 --> 00:11:14,640 Speaker 1: you deal with a Democratic party that's super divided and 181 00:11:14,760 --> 00:11:19,439 Speaker 1: has at its core uh President Clinton, who is under 182 00:11:19,920 --> 00:11:22,560 Speaker 1: these constant scandals that are really big. You know, I 183 00:11:22,600 --> 00:11:25,720 Speaker 1: had a high top secret clearance at both Treasury and 184 00:11:25,840 --> 00:11:30,760 Speaker 1: State Department, and it's inconceivable that those uh that those 185 00:11:30,800 --> 00:11:34,120 Speaker 1: messages were being put on a personal server. So the 186 00:11:34,120 --> 00:11:36,400 Speaker 1: country has got to deal with that. Then, as the 187 00:11:36,480 --> 00:11:40,840 Speaker 1: Republican Party rebuilds itself under your scenario, I think it 188 00:11:40,920 --> 00:11:43,720 Speaker 1: can be. The easier job is for the Republicans to 189 00:11:43,800 --> 00:11:48,679 Speaker 1: pull together and and begin running, uh, continue running on 190 00:11:48,720 --> 00:11:51,080 Speaker 1: a growth program. There doesn't need to be a change 191 00:11:51,440 --> 00:11:55,000 Speaker 1: in the Republican vision of where to go. There's got 192 00:11:55,000 --> 00:11:57,720 Speaker 1: to be a change I think in how Washington operates, 193 00:11:57,760 --> 00:12:00,720 Speaker 1: and I don't know how you achieve that. If Hillary 194 00:12:00,720 --> 00:12:04,760 Speaker 1: Clinton's president. That's tom That's why I'm I'm working for Trump. 195 00:12:05,000 --> 00:12:08,680 Speaker 1: He's the one saying I'm going to change Washington. Hillary 196 00:12:08,720 --> 00:12:12,280 Speaker 1: is basically saying I'm going to continue what President Obama 197 00:12:12,320 --> 00:12:15,720 Speaker 1: has done, and that's been a declining real median income. 198 00:12:16,360 --> 00:12:21,360 Speaker 1: Greg from Horizon Investments, one of our favorite political analysts, 199 00:12:21,600 --> 00:12:26,240 Speaker 1: points out this morning that Republican orthodoxy for decades, including 200 00:12:26,360 --> 00:12:29,640 Speaker 1: David Malpass, has been free trade and cutting the deficit, 201 00:12:30,000 --> 00:12:32,760 Speaker 1: and this year that is the opposite of what the 202 00:12:32,760 --> 00:12:36,640 Speaker 1: presidential candidate of the GOLP wants to do. So, what's 203 00:12:36,679 --> 00:12:41,680 Speaker 1: happened to Republican orthodoxy? Uh, you know when you when 204 00:12:41,679 --> 00:12:44,840 Speaker 1: you try to define what those terms means. So I've 205 00:12:44,960 --> 00:12:49,439 Speaker 1: really been more uh interested in controlling and restraining federal 206 00:12:49,480 --> 00:12:53,760 Speaker 1: spending and cutting taxes so that that is the best 207 00:12:53,800 --> 00:12:56,280 Speaker 1: way to get the national debt as a percentage of 208 00:12:56,320 --> 00:12:59,400 Speaker 1: GDP to stop going up. So it's a little different 209 00:12:59,600 --> 00:13:05,240 Speaker 1: than saying deficit cutting. As as Republican orthodoxy. With regard 210 00:13:05,280 --> 00:13:08,080 Speaker 1: to trade, we we got off track. The trade deals 211 00:13:08,080 --> 00:13:11,560 Speaker 1: got way too big. They're not they're not enforceable, they're 212 00:13:11,600 --> 00:13:15,440 Speaker 1: not being enforced, and they're not working for American workers. 213 00:13:15,120 --> 00:13:16,760 Speaker 1: And that's how we got left. I want to make 214 00:13:16,760 --> 00:13:19,520 Speaker 1: this clear, Mr male Pass, are you staying here against TPP? 215 00:13:19,960 --> 00:13:22,880 Speaker 1: I'm yeah. I'm against TPP and was from the beginning. 216 00:13:22,920 --> 00:13:26,640 Speaker 1: As NAFTA was negotiated, it got bigger and bigger and 217 00:13:26,679 --> 00:13:30,120 Speaker 1: more complex and didn't didn't didn't work in the way 218 00:13:30,160 --> 00:13:32,400 Speaker 1: it was supposed to work. And there's a whole host 219 00:13:32,480 --> 00:13:36,080 Speaker 1: of reasons complaints, and so TPP would not work for 220 00:13:36,400 --> 00:13:39,880 Speaker 1: the global interest, for the u S interests and workers 221 00:13:39,880 --> 00:13:42,880 Speaker 1: that especially wouldn't work. We're out of time. David mayle Pass, 222 00:13:42,960 --> 00:13:47,360 Speaker 1: please come back. Congratulations again in your public service. Always 223 00:13:47,440 --> 00:13:50,200 Speaker 1: valuable to the nation. Mr male Pass within CIMA Global, 224 00:13:50,520 --> 00:14:05,839 Speaker 1: and he is aggressively in support of Trump economics that 225 00:14:06,000 --> 00:14:08,880 Speaker 1: many constant of Deutsche Bank thrilled that he joins us 226 00:14:08,880 --> 00:14:12,360 Speaker 1: to that we just heard dominate the perils of financial 227 00:14:12,400 --> 00:14:17,280 Speaker 1: engineering and financial certitude. All of us is based on 228 00:14:17,320 --> 00:14:20,600 Speaker 1: a Bell curve, a Gaussian distribution, and we're learning that 229 00:14:20,640 --> 00:14:24,200 Speaker 1: there have been black swans along the way, and they've 230 00:14:24,240 --> 00:14:28,000 Speaker 1: maybe occurred a little more often than we thought. How 231 00:14:28,040 --> 00:14:31,240 Speaker 1: are we doing? Are there black or gray swan's out there? 232 00:14:32,120 --> 00:14:35,840 Speaker 1: I think it's almost a possible question to answer in 233 00:14:35,840 --> 00:14:39,000 Speaker 1: the sense that the biggest fear you have is not 234 00:14:39,000 --> 00:14:41,080 Speaker 1: not knowing what you don't know, and that is the 235 00:14:41,200 --> 00:14:44,160 Speaker 1: kind of definition I guess of uh, these sort of 236 00:14:44,200 --> 00:14:47,800 Speaker 1: black swan events. I think we're very good at sort 237 00:14:47,840 --> 00:14:51,320 Speaker 1: of understanding that the problems with what we do know 238 00:14:51,480 --> 00:14:54,320 Speaker 1: and various things like that. And you know, there's all 239 00:14:54,320 --> 00:14:57,720 Speaker 1: sorts of pitfalls out there. I guess, is Jackson all 240 00:14:57,840 --> 00:15:00,960 Speaker 1: one of the pitfalls? Michael mckeeson is way there. You've 241 00:15:01,000 --> 00:15:05,360 Speaker 1: written and Jaxon all, is this a data dependent Janet Yellett, Well, 242 00:15:05,360 --> 00:15:08,640 Speaker 1: the FED seems to be uh, sort of in shift mode. 243 00:15:08,640 --> 00:15:12,440 Speaker 1: I mean, over the summer there's clearly been some new 244 00:15:12,520 --> 00:15:15,280 Speaker 1: research being put out by various FED officials. I think 245 00:15:15,320 --> 00:15:19,520 Speaker 1: the markets have finished with the idea that the FED 246 00:15:20,400 --> 00:15:25,120 Speaker 1: has been data dependent and the data got weaker, and 247 00:15:25,160 --> 00:15:27,360 Speaker 1: therefore they took the FED pretty much out of the 248 00:15:27,360 --> 00:15:30,080 Speaker 1: picture in terms of raising rates very much at all 249 00:15:30,080 --> 00:15:32,360 Speaker 1: over the next couple of years. That's where we sort 250 00:15:32,360 --> 00:15:34,160 Speaker 1: of are, and the questions are we in some sort 251 00:15:34,160 --> 00:15:37,480 Speaker 1: of transition now where the focus is on perhaps having 252 00:15:37,800 --> 00:15:41,480 Speaker 1: a different kind of inflation target, perhaps being concerned about 253 00:15:41,720 --> 00:15:46,520 Speaker 1: financial stability issues around the low for long rate outlook, 254 00:15:46,800 --> 00:15:49,160 Speaker 1: And that's going to be uh in the background of 255 00:15:49,200 --> 00:15:53,040 Speaker 1: whatever Janet Yellen talks about and how how how you 256 00:15:53,120 --> 00:15:55,040 Speaker 1: know how far she wants to sort of push down 257 00:15:55,360 --> 00:15:58,640 Speaker 1: these new avenues. And right now, you know, I think 258 00:15:58,680 --> 00:16:03,280 Speaker 1: there's a reasonable charance that data dependency is becoming less 259 00:16:03,320 --> 00:16:07,600 Speaker 1: important and it's more about defining a new kind of 260 00:16:07,680 --> 00:16:09,920 Speaker 1: strategy for the FED in the context of what they're 261 00:16:09,960 --> 00:16:13,440 Speaker 1: calling the low our star, the low equilibrium rate for 262 00:16:14,000 --> 00:16:17,240 Speaker 1: FED funds. The markets already got to a lower our 263 00:16:17,360 --> 00:16:21,360 Speaker 1: star ahead of the FED, and so I'm wondering, sort 264 00:16:21,360 --> 00:16:23,200 Speaker 1: of what do you what do you trade on? What 265 00:16:23,280 --> 00:16:26,760 Speaker 1: do you make base your forecast on? Is it the Fed? 266 00:16:26,920 --> 00:16:31,120 Speaker 1: Is it your own inflation and growth Outlook? Uh? What 267 00:16:31,240 --> 00:16:34,080 Speaker 1: carries the most weight since the Fed and the markets 268 00:16:34,080 --> 00:16:36,680 Speaker 1: have diverged by so much for so long now, Well, 269 00:16:36,720 --> 00:16:39,480 Speaker 1: I think what needs to happen is the Fed. The 270 00:16:39,480 --> 00:16:43,680 Speaker 1: FED is. I mean, there are very few people beyond 271 00:16:43,720 --> 00:16:46,480 Speaker 1: the FED who who still don't get it, but there 272 00:16:46,480 --> 00:16:49,480 Speaker 1: are some, and unfortunately think the FED has just been 273 00:16:49,600 --> 00:16:52,000 Speaker 1: very slow in getting it as well. I mean they've 274 00:16:52,080 --> 00:16:54,880 Speaker 1: taken an awful long time to bring down their estimates 275 00:16:55,200 --> 00:16:57,480 Speaker 1: of the neutral funds rate, so anything close to where 276 00:16:57,520 --> 00:16:59,320 Speaker 1: the market is, and they're still not there. They still 277 00:16:59,320 --> 00:17:01,400 Speaker 1: think it's around three percent. So I think there's an 278 00:17:01,400 --> 00:17:03,680 Speaker 1: opportunity for the FED. And I don't blame Janet Yell, 279 00:17:03,720 --> 00:17:05,760 Speaker 1: and I blame some of her colleagues, but I think 280 00:17:05,760 --> 00:17:07,840 Speaker 1: there's an opportunity for the Fair to actually try and 281 00:17:07,880 --> 00:17:11,439 Speaker 1: play catch up at least uh. And that would be, 282 00:17:11,480 --> 00:17:13,560 Speaker 1: for example, to say, look, okay, if we want to 283 00:17:13,640 --> 00:17:16,119 Speaker 1: raise rates a bit more quickly than the market at 284 00:17:16,160 --> 00:17:18,479 Speaker 1: the same time, we're going to recognize that the market 285 00:17:18,520 --> 00:17:22,440 Speaker 1: has an equilibrium rate, that is, that is much lower 286 00:17:22,440 --> 00:17:24,840 Speaker 1: than they've had. But they will tend to agree with this, 287 00:17:24,920 --> 00:17:26,720 Speaker 1: and so she can actually work with the dots if 288 00:17:26,720 --> 00:17:28,440 Speaker 1: you like. I mean, people don't like to talk about 289 00:17:28,440 --> 00:17:30,080 Speaker 1: the dots or the FED doesn't like to talk about 290 00:17:30,080 --> 00:17:32,639 Speaker 1: them as a sort of main sort of part of 291 00:17:32,680 --> 00:17:35,680 Speaker 1: how markets should should react and think. But I think, 292 00:17:35,720 --> 00:17:38,280 Speaker 1: you know, just really just being aggressive and saying, hey, look, 293 00:17:38,320 --> 00:17:41,600 Speaker 1: you know, we have no idea when interest rates might 294 00:17:41,640 --> 00:17:43,560 Speaker 1: sort of get back to what we've previously thought were 295 00:17:43,600 --> 00:17:45,760 Speaker 1: normal levels. But let's just say, you know, we can 296 00:17:45,800 --> 00:17:48,040 Speaker 1: only probably raise rates to sort of you know, two 297 00:17:48,040 --> 00:17:50,600 Speaker 1: percent at at that best over the next few years, 298 00:17:50,760 --> 00:17:53,480 Speaker 1: but at the same time, we'd like to perhaps move 299 00:17:53,520 --> 00:17:56,040 Speaker 1: a bit more quickly than it's currently priced. In dominic 300 00:17:56,160 --> 00:17:59,920 Speaker 1: there is a discussion, obviously some of the naval gate 301 00:18:00,040 --> 00:18:05,080 Speaker 1: seeing among economists about orthodox economics and about where theory 302 00:18:05,400 --> 00:18:09,200 Speaker 1: is going that underpins what we do and particularly what 303 00:18:09,280 --> 00:18:12,960 Speaker 1: we do in policy making. What will the new orthodox 304 00:18:13,080 --> 00:18:18,280 Speaker 1: look like? UM, Well, I think the new Orthodox going 305 00:18:18,400 --> 00:18:22,520 Speaker 1: forward should um basically look beyond some of our sort 306 00:18:22,560 --> 00:18:26,880 Speaker 1: of standard metrics for how we measure economic welfare such 307 00:18:26,920 --> 00:18:30,440 Speaker 1: as growth, and obviously linked to that sort of inflation. 308 00:18:30,880 --> 00:18:33,800 Speaker 1: I think one of when we people have this discussion 309 00:18:33,800 --> 00:18:37,280 Speaker 1: about productivity and that obviously feeds directly into the GDP, 310 00:18:37,480 --> 00:18:39,760 Speaker 1: and it's all very disappointing, and we're told that this 311 00:18:39,840 --> 00:18:42,399 Speaker 1: is obviously sort of bad outcome. And one of the 312 00:18:42,560 --> 00:18:44,840 Speaker 1: sort of concepts that I've been playing around with is 313 00:18:44,880 --> 00:18:48,480 Speaker 1: the idea that the technology boom is obviously doing tremendous 314 00:18:48,560 --> 00:18:53,080 Speaker 1: things to non GDP items such as leisure, and so 315 00:18:53,200 --> 00:18:56,919 Speaker 1: the idea that basically our leisure productivity if you like 316 00:18:57,040 --> 00:19:00,719 Speaker 1: that concept, is actually improving massively. People are much more 317 00:19:00,760 --> 00:19:03,280 Speaker 1: efficient with their leisure time, and that doesn't really go 318 00:19:03,320 --> 00:19:05,760 Speaker 1: into GDP, and that's because a lot of the new 319 00:19:05,800 --> 00:19:08,960 Speaker 1: technology is effectively being given away at marginal costs, which 320 00:19:08,960 --> 00:19:12,560 Speaker 1: is zero, and therefore it doesn't factor into a lot 321 00:19:12,560 --> 00:19:14,600 Speaker 1: of the metrics that we look at. It doesn't actually 322 00:19:14,680 --> 00:19:19,000 Speaker 1: change the necessarily the policymaker reaction function, but it does 323 00:19:19,080 --> 00:19:22,480 Speaker 1: actually help explain I think some of the uh that 324 00:19:22,600 --> 00:19:25,639 Speaker 1: the incongruit ease that people have and try trying to 325 00:19:25,720 --> 00:19:28,480 Speaker 1: understand why this seems to be such a sort of 326 00:19:28,560 --> 00:19:32,199 Speaker 1: Golden Age for technology, and yet people feel sort of, 327 00:19:32,240 --> 00:19:35,800 Speaker 1: at least in the GDP concept, sort of miserable. But 328 00:19:35,880 --> 00:19:38,000 Speaker 1: really it's because they're all sitting at home having sort 329 00:19:38,000 --> 00:19:40,880 Speaker 1: of great, great fun sort of thing on the Internet 330 00:19:40,920 --> 00:19:43,800 Speaker 1: and etcetera. And I think this goes down the road 331 00:19:43,880 --> 00:19:46,840 Speaker 1: or something like this French economist Picty who was sort 332 00:19:46,880 --> 00:19:49,040 Speaker 1: of saying, in the end you end up with sort 333 00:19:49,040 --> 00:19:52,720 Speaker 1: of a lot of concentrations of wealth in very few hands, 334 00:19:53,040 --> 00:19:56,680 Speaker 1: but not necessarily people being quite as distraught as that 335 00:19:56,800 --> 00:19:59,919 Speaker 1: might other otherwise infer and I think the transitional phases 336 00:20:00,440 --> 00:20:03,600 Speaker 1: is difficult because people something realized that, look, you know 337 00:20:03,800 --> 00:20:05,639 Speaker 1: that there's this guy who's earning tons of money and 338 00:20:05,680 --> 00:20:07,320 Speaker 1: has a lot of money, and you may not like that, 339 00:20:07,680 --> 00:20:10,480 Speaker 1: but I think in a sort of flow concept of welfare, 340 00:20:11,640 --> 00:20:13,040 Speaker 1: at some point you sort of get used to it 341 00:20:13,080 --> 00:20:15,119 Speaker 1: and realize that you are actually better off, perhaps in 342 00:20:15,160 --> 00:20:17,840 Speaker 1: this new world, brave new you are. It's either sort 343 00:20:17,840 --> 00:20:20,879 Speaker 1: of oldest Huxley or a sort of Awellian sort of 344 00:20:20,960 --> 00:20:24,240 Speaker 1: vision where we're all heading but it's not necessarily all bad, 345 00:20:25,359 --> 00:20:29,359 Speaker 1: so it's not animal house. Um. This is the Robert 346 00:20:29,359 --> 00:20:31,840 Speaker 1: Gordon argument. The rise and fall of American Productivity is 347 00:20:31,880 --> 00:20:35,520 Speaker 1: a terrific book, um And, and his argument is, we 348 00:20:35,520 --> 00:20:37,680 Speaker 1: are never going to see the kind of productivity gains 349 00:20:37,720 --> 00:20:40,960 Speaker 1: we saw around the turn of the twentieth century. Again, 350 00:20:41,480 --> 00:20:45,480 Speaker 1: do you think we can translate this leisure time productivity 351 00:20:45,760 --> 00:20:50,879 Speaker 1: increase into some sort of productivity move that will raise 352 00:20:51,040 --> 00:20:54,520 Speaker 1: living standards? Well, I think it is raising living standards, 353 00:20:54,560 --> 00:20:56,720 Speaker 1: but we're just measuring living standards in a sort of 354 00:20:56,800 --> 00:20:58,960 Speaker 1: rather archaic quite at the moment. We're trying to measure 355 00:20:58,960 --> 00:21:01,919 Speaker 1: it in sort of GDP per capita terms, and you 356 00:21:01,920 --> 00:21:04,399 Speaker 1: know that's sort of inappropriate. I mean, there's there's a 357 00:21:04,520 --> 00:21:07,560 Speaker 1: basic basic economic theory actually gives you a great toolkit 358 00:21:07,600 --> 00:21:11,320 Speaker 1: to try and understand the difference. And obviously it's consumer surplus. 359 00:21:11,320 --> 00:21:14,000 Speaker 1: It's the fact that people would be willing to pay 360 00:21:14,040 --> 00:21:16,600 Speaker 1: for something that they don't have to pay for, or 361 00:21:16,640 --> 00:21:18,639 Speaker 1: they pay more than they are currently paying for. And 362 00:21:18,680 --> 00:21:21,600 Speaker 1: that consumer surplus, if it stays with a consumer, obviously 363 00:21:21,880 --> 00:21:24,560 Speaker 1: as tremendous welfare to the consumer. If you get it 364 00:21:24,560 --> 00:21:27,080 Speaker 1: away from the consumer and put it to the producer, 365 00:21:27,320 --> 00:21:30,040 Speaker 1: and then obviously that translates into profits in GDP and 366 00:21:30,200 --> 00:21:33,960 Speaker 1: productivity as we currently measure it. And I think the 367 00:21:34,000 --> 00:21:37,399 Speaker 1: idea is we need to focus on those welfare concepts, 368 00:21:37,920 --> 00:21:40,520 Speaker 1: which is much more significant than the g d P, 369 00:21:40,720 --> 00:21:45,159 Speaker 1: especially now where the cost of actually producing stuff, you know, 370 00:21:45,160 --> 00:21:47,600 Speaker 1: it goes down and you know, we may not get 371 00:21:47,680 --> 00:21:49,320 Speaker 1: much of a wage for it, but then you know, 372 00:21:49,359 --> 00:21:50,800 Speaker 1: maybe you don't need so much of a wage for 373 00:21:50,840 --> 00:21:53,880 Speaker 1: it if you can sit at home and watch movies 374 00:21:53,920 --> 00:21:55,800 Speaker 1: for free all day long sort of thing. And those 375 00:21:55,840 --> 00:21:57,680 Speaker 1: are the issues I think that's that are going to 376 00:21:57,720 --> 00:21:59,959 Speaker 1: become more and more important. And I think collaborative can 377 00:22:00,000 --> 00:22:02,399 Speaker 1: assumption by the way, so that fits into this model 378 00:22:02,400 --> 00:22:04,640 Speaker 1: as well. The idea that you know, people don't feel 379 00:22:04,640 --> 00:22:06,479 Speaker 1: they you know, that there's an awful lot of waste 380 00:22:06,480 --> 00:22:09,240 Speaker 1: when you spend a lot of money buying some stuff 381 00:22:09,280 --> 00:22:11,800 Speaker 1: and you don't use it half the time, and basically 382 00:22:11,800 --> 00:22:14,239 Speaker 1: the marginal cost to you of kind of you know, 383 00:22:14,480 --> 00:22:16,879 Speaker 1: sharing that consumption with someone else might be very very 384 00:22:16,920 --> 00:22:18,879 Speaker 1: low and you might sort of give that away. And 385 00:22:19,160 --> 00:22:21,080 Speaker 1: there's there's that sort of concept there as well. I 386 00:22:21,119 --> 00:22:25,480 Speaker 1: think another concept that is under uh not under attack, 387 00:22:25,560 --> 00:22:28,280 Speaker 1: but under question is the idea of the Phillips curve 388 00:22:28,440 --> 00:22:32,120 Speaker 1: and whether or not tightening labor markets are actually going 389 00:22:32,160 --> 00:22:35,840 Speaker 1: to generate inflation again, what do you what do you 390 00:22:35,880 --> 00:22:37,480 Speaker 1: think about Let me add in the question of whether 391 00:22:37,560 --> 00:22:42,000 Speaker 1: you think central banks central bank policy can generate inflation. 392 00:22:42,160 --> 00:22:45,240 Speaker 1: It's been eight years on we've had extraordinary policy and 393 00:22:45,320 --> 00:22:48,720 Speaker 1: we have no real inflation to speak of. Well, I 394 00:22:48,920 --> 00:22:51,719 Speaker 1: mean when I've looked at inflation historically, I mean I've 395 00:22:51,720 --> 00:22:54,040 Speaker 1: always been struck by the idea that inflation is a 396 00:22:54,080 --> 00:22:57,399 Speaker 1: sort of rare beast, uh and it happens from the 397 00:22:57,440 --> 00:23:00,119 Speaker 1: supply side, and it happens during wars and famines. You 398 00:23:00,119 --> 00:23:02,399 Speaker 1: can go back thousands of years where I believe not. 399 00:23:02,440 --> 00:23:06,240 Speaker 1: There is data coming out of countries like Sweden and 400 00:23:06,400 --> 00:23:09,439 Speaker 1: the UK to some extent, and you see it in 401 00:23:09,480 --> 00:23:12,639 Speaker 1: a historical context, but it's always fairly brief and supply driven. 402 00:23:12,920 --> 00:23:15,600 Speaker 1: I think the trouble with with this generation, and I 403 00:23:15,600 --> 00:23:17,280 Speaker 1: don't mean the sort of you know, the millennials, but 404 00:23:17,400 --> 00:23:20,080 Speaker 1: you know, perhaps our generational sort of you know one 405 00:23:20,160 --> 00:23:22,879 Speaker 1: one back so speak is that we saw inflation for 406 00:23:22,920 --> 00:23:25,320 Speaker 1: the first time pretty much in a completely different context. 407 00:23:25,320 --> 00:23:27,879 Speaker 1: It was demand driven, and it's all to do with 408 00:23:27,920 --> 00:23:29,800 Speaker 1: the breakdown of Breton woods, and it was all to 409 00:23:29,840 --> 00:23:32,960 Speaker 1: do with the rise of of of the sort of 410 00:23:33,359 --> 00:23:36,400 Speaker 1: the unionized labor and the social conflict that you had 411 00:23:36,400 --> 00:23:39,480 Speaker 1: in the seventies in particular, and that's where the Phillips 412 00:23:39,480 --> 00:23:42,639 Speaker 1: curve was born. And therefore, and I think the Philis 413 00:23:42,680 --> 00:23:44,600 Speaker 1: curve is is dead and buried. I mean, there's no 414 00:23:44,880 --> 00:23:46,040 Speaker 1: you know, we're not going to go back to that 415 00:23:46,040 --> 00:23:50,040 Speaker 1: sort of demand of inflation. And that's why inflation as 416 00:23:50,080 --> 00:23:52,040 Speaker 1: a concept really, I mean, if you want to go 417 00:23:52,119 --> 00:23:54,120 Speaker 1: back there, it's it's it's you have to be very 418 00:23:54,119 --> 00:23:56,439 Speaker 1: purposeful in doing it, and you have to almost do 419 00:23:56,520 --> 00:24:00,520 Speaker 1: the sort of helicopter men because it's a different economy. 420 00:24:00,560 --> 00:24:03,800 Speaker 1: The slow rates are different, the rates of change within 421 00:24:03,880 --> 00:24:08,200 Speaker 1: developing and developed countries are different than what is the 422 00:24:08,240 --> 00:24:13,040 Speaker 1: technology transmission through but productivity you told me earlier you 423 00:24:13,080 --> 00:24:16,199 Speaker 1: don't think productivity is a measurement issue. Then how it 424 00:24:16,320 --> 00:24:23,360 Speaker 1: is technology diffused across capital, labor in our total factor productivity? 425 00:24:24,160 --> 00:24:26,080 Speaker 1: The answer is, we don't know. I mean, we just 426 00:24:26,160 --> 00:24:29,320 Speaker 1: don't know what technology is doing, do we? Yes, I 427 00:24:29,320 --> 00:24:31,640 Speaker 1: mean it's it's I mean it's no, we we don't. 428 00:24:31,760 --> 00:24:34,080 Speaker 1: We don't know. I mean, I I think all the 429 00:24:34,119 --> 00:24:36,679 Speaker 1: best the closest you can get to is try and 430 00:24:36,720 --> 00:24:40,119 Speaker 1: sort of what we do know is that productivity is 431 00:24:40,240 --> 00:24:46,040 Speaker 1: related very closely still to measured capital stock improvement, which 432 00:24:46,080 --> 00:24:49,439 Speaker 1: embodies technology, and that relationship with labor. We do know 433 00:24:49,520 --> 00:24:52,600 Speaker 1: that that hasn't broken down. Uh. And if you want 434 00:24:52,600 --> 00:24:54,639 Speaker 1: to make a mismeasurement issue, it's not about you know, 435 00:24:54,680 --> 00:24:58,000 Speaker 1: measuring the residual of productivity. It's really you have to 436 00:24:58,000 --> 00:25:00,359 Speaker 1: go and say, look, we're mismeasuring investment, I mean capital 437 00:25:00,359 --> 00:25:07,639 Speaker 1: stage exactly, mismeasuring investment into capital. Who do we blame 438 00:25:07,720 --> 00:25:11,120 Speaker 1: for that? Well, I mean some people have looked at 439 00:25:11,640 --> 00:25:15,920 Speaker 1: the government, obviously to the statisticians there. They haven't captured 440 00:25:15,960 --> 00:25:19,600 Speaker 1: perhaps various price deflator moves over the past few years 441 00:25:19,640 --> 00:25:22,080 Speaker 1: with the rapid change in technology, and and there's been 442 00:25:22,080 --> 00:25:24,159 Speaker 1: a lot of research put out there. I think all 443 00:25:24,560 --> 00:25:27,240 Speaker 1: of that probably explains a little bit, but it's by 444 00:25:27,280 --> 00:25:30,320 Speaker 1: no means can explain the full amount of the disappointment 445 00:25:30,320 --> 00:25:32,720 Speaker 1: and productivity. And that's why I think you have to 446 00:25:32,840 --> 00:25:36,360 Speaker 1: then go and accept that you would. I mean, even 447 00:25:36,520 --> 00:25:39,479 Speaker 1: during the productivity miracle years of the late nineties when 448 00:25:39,480 --> 00:25:42,800 Speaker 1: they revised the data, there's that there were massive revisions 449 00:25:43,040 --> 00:25:45,840 Speaker 1: and all they did was affected productivity by perhaps one 450 00:25:45,880 --> 00:25:48,560 Speaker 1: percent at most. I mean, we're talking about a shortfall 451 00:25:48,600 --> 00:25:51,159 Speaker 1: and productivity of at least two, if not three percent 452 00:25:51,520 --> 00:25:54,159 Speaker 1: from what we might have expected. And I think to 453 00:25:54,200 --> 00:25:57,520 Speaker 1: answer that question you have to basically say, somehow we 454 00:25:57,600 --> 00:26:01,080 Speaker 1: are over employing people relative to whatever uh that investment 455 00:26:01,080 --> 00:26:04,960 Speaker 1: path that we're on is, and and that unemployment. Is 456 00:26:05,000 --> 00:26:07,840 Speaker 1: it because companies are just very risk averse. Is it 457 00:26:07,880 --> 00:26:11,360 Speaker 1: because there's some incentive structure being given through the financial 458 00:26:11,400 --> 00:26:15,359 Speaker 1: sector to encourage them to employ people with a hope 459 00:26:15,400 --> 00:26:18,280 Speaker 1: that leads to high demand rather than than front run 460 00:26:18,280 --> 00:26:20,639 Speaker 1: it by doing even more investment. I mean, Mike, I 461 00:26:20,680 --> 00:26:23,520 Speaker 1: think this is just extraordinary. We're at a time bike McKie. 462 00:26:23,520 --> 00:26:27,040 Speaker 1: But it really speaks to the underlying theme at your 463 00:26:27,160 --> 00:26:31,639 Speaker 1: Jackson Hall of how do you jump start productivity? It's 464 00:26:31,680 --> 00:26:35,359 Speaker 1: gonna be a real question for the central bankers, and 465 00:26:35,359 --> 00:26:38,920 Speaker 1: they're not just from the FED, is also Coronasan, from 466 00:26:38,920 --> 00:26:42,520 Speaker 1: the Bank of Japan, from the ECB and others and 467 00:26:42,640 --> 00:26:45,480 Speaker 1: other central banks, and they're debating how do we model 468 00:26:45,600 --> 00:26:48,440 Speaker 1: this new future world and how do we fit monetary 469 00:26:48,480 --> 00:26:53,040 Speaker 1: policy into it. Who you put your trust in matters. 470 00:26:53,680 --> 00:26:57,560 Speaker 1: Investors have put their trust in independent registered investment advisors 471 00:26:57,560 --> 00:27:01,920 Speaker 1: to the tune of four trillion dollars. Why they see 472 00:27:01,960 --> 00:27:05,720 Speaker 1: their role is to serve, not sell. That's why Charles 473 00:27:05,720 --> 00:27:08,440 Speaker 1: Schwab is committed to the success of over seven thousand 474 00:27:08,480 --> 00:27:13,600 Speaker 1: independent financial advisors who passionately dedicate themselves to helping people 475 00:27:13,640 --> 00:27:17,800 Speaker 1: achieve their financial goals. Learn more and find your independent 476 00:27:17,840 --> 00:27:26,800 Speaker 1: advisor dot com. Well, I am here in Montana. Officially, 477 00:27:26,840 --> 00:27:28,520 Speaker 1: I think the map says we are in the middle 478 00:27:28,560 --> 00:27:31,719 Speaker 1: of nowhere, and it is a beautiful nowhere. This is 479 00:27:31,760 --> 00:27:35,440 Speaker 1: the first, we hope the annual, first annual Kemp Kutuck 480 00:27:35,560 --> 00:27:39,880 Speaker 1: West David getting together economists and FETE officials to sit 481 00:27:39,920 --> 00:27:43,280 Speaker 1: around and talk about the economy. And I'm not impressed. 482 00:27:43,320 --> 00:27:46,440 Speaker 1: It is a gorgeous sne Michael, You're not You aren't invited, 483 00:27:46,560 --> 00:27:50,400 Speaker 1: is what you're complaining about. Nineteen What was that sound? 484 00:27:50,520 --> 00:27:56,800 Speaker 1: I didn't hear that sound in Montana? Nineteen fifty five 485 00:27:57,600 --> 00:28:03,240 Speaker 1: record Montana Cutthroat Trout sixteen pounds. What are you guys 486 00:28:03,280 --> 00:28:06,240 Speaker 1: doing out there? Well, we caught it, Tom and we 487 00:28:06,320 --> 00:28:08,800 Speaker 1: released it, so it's here for you to come visit. 488 00:28:09,440 --> 00:28:12,560 Speaker 1: It's a little older now but moving slower, which is 489 00:28:12,560 --> 00:28:19,520 Speaker 1: good for your job. David Kodak is of course, the founder, principal, 490 00:28:19,800 --> 00:28:23,280 Speaker 1: chief investment officer of Cumberland Advisors. And this is the 491 00:28:23,760 --> 00:28:26,400 Speaker 1: second kind of site you've set up for this sort 492 00:28:26,440 --> 00:28:30,760 Speaker 1: of thing for the people who aren't, uh completely familiar 493 00:28:30,800 --> 00:28:32,520 Speaker 1: with it. What what is Camp Kotok? What are you 494 00:28:32,560 --> 00:28:37,520 Speaker 1: trying to do? We gather people together from economics, financial markets, 495 00:28:38,200 --> 00:28:43,040 Speaker 1: various businesses and we are able to talk among ourselves 496 00:28:43,320 --> 00:28:46,440 Speaker 1: in an informal setting. And also we do a little fishing, 497 00:28:46,480 --> 00:28:49,880 Speaker 1: of course, and we picked nice places and we talked 498 00:28:49,880 --> 00:28:52,520 Speaker 1: about the world. And so we decided, given all the 499 00:28:52,560 --> 00:28:55,840 Speaker 1: attention on the FED, we needed to get close to them. 500 00:28:56,040 --> 00:28:59,120 Speaker 1: So we came within two hours of Jackson Hall and 501 00:28:59,200 --> 00:29:01,360 Speaker 1: found a place we can get close to the fit. 502 00:29:01,680 --> 00:29:04,000 Speaker 1: Unfortunately it's a little more than two hours now because 503 00:29:04,000 --> 00:29:07,120 Speaker 1: of the forest fires. We've been talking about that this morning. Uh. 504 00:29:07,240 --> 00:29:10,600 Speaker 1: We do sit around and you know, I participate as 505 00:29:10,640 --> 00:29:14,240 Speaker 1: well and talk about the economy. And I know, um, 506 00:29:14,440 --> 00:29:15,960 Speaker 1: you've been doing that for a couple of days. What's 507 00:29:15,960 --> 00:29:18,840 Speaker 1: the most interesting thing you've heard or learned or u 508 00:29:19,760 --> 00:29:22,520 Speaker 1: or argued over the past couple of days. Well, two 509 00:29:22,560 --> 00:29:27,120 Speaker 1: things really jump out this morning. The first is this 510 00:29:27,280 --> 00:29:31,520 Speaker 1: news item that eight reserve banks have now called for 511 00:29:31,720 --> 00:29:35,920 Speaker 1: discount rate hike. That's a symbolic way for regional bank 512 00:29:36,440 --> 00:29:38,880 Speaker 1: to say to the board of governors, Hey, boys, it's 513 00:29:38,960 --> 00:29:41,840 Speaker 1: time to move or boys and girls is what I 514 00:29:41,840 --> 00:29:45,800 Speaker 1: should say. And we are up to eight. The indications 515 00:29:45,840 --> 00:29:47,680 Speaker 1: are when you get to that kind of a number, 516 00:29:47,760 --> 00:29:51,400 Speaker 1: FED hike is going to come. Now. Whether that will 517 00:29:51,440 --> 00:29:55,240 Speaker 1: be acknowledged in Jackson Hole or not, we'll see. That's 518 00:29:55,240 --> 00:29:58,440 Speaker 1: Item one. The second thing is we've been talking about 519 00:29:58,520 --> 00:30:04,480 Speaker 1: libor and library spreads against treasuries are widening. A year ago, 520 00:30:04,760 --> 00:30:09,160 Speaker 1: the library was thirty basis points. Three month library was 521 00:30:09,240 --> 00:30:12,560 Speaker 1: thirty basis points. Now it's eighty. The FED is only 522 00:30:12,640 --> 00:30:16,640 Speaker 1: raised rates a quarter of a point, but libraries up 523 00:30:16,640 --> 00:30:19,680 Speaker 1: behalf a point. Beginning to say, what does that mean? 524 00:30:20,280 --> 00:30:22,880 Speaker 1: And here in the gathering, we have a number of 525 00:30:22,880 --> 00:30:26,120 Speaker 1: folks who are in commercial real estate, residential real estate, 526 00:30:26,160 --> 00:30:30,040 Speaker 1: and multi family and they are all tied. All those 527 00:30:30,120 --> 00:30:33,800 Speaker 1: loans are tied to libor, and their costs and interest 528 00:30:33,840 --> 00:30:38,760 Speaker 1: costs are rising, and that leveraging commercial real estate is 529 00:30:38,800 --> 00:30:41,960 Speaker 1: now a concern. I know, Tom, we have talked about 530 00:30:41,960 --> 00:30:44,840 Speaker 1: that on the show recently, with a number of people 531 00:30:44,880 --> 00:30:48,800 Speaker 1: trying to figure out exactly what's driving uh the library 532 00:30:48,960 --> 00:30:50,960 Speaker 1: rate higher some of his money market rules. And I 533 00:30:50,960 --> 00:30:54,360 Speaker 1: don't hear too much talk about concern about the short 534 00:30:54,440 --> 00:30:58,000 Speaker 1: term market, but David Kotok Dominique constant is adamant that 535 00:30:58,080 --> 00:31:01,400 Speaker 1: the shift in central bankers is some data dependency. In 536 00:31:01,400 --> 00:31:04,920 Speaker 1: the other mumbo jumbo, they're gonna start talking about financial 537 00:31:04,960 --> 00:31:09,000 Speaker 1: instability translate that. What do they mean by that? Well, 538 00:31:09,040 --> 00:31:14,760 Speaker 1: I think that's an issue. Um this focus on what 539 00:31:14,800 --> 00:31:19,640 Speaker 1: are the impacts of of central bankers decisions and separately, 540 00:31:20,200 --> 00:31:23,600 Speaker 1: what are the impacts of rule changes? And the rule 541 00:31:23,680 --> 00:31:27,200 Speaker 1: changes are huge, and my view is they're being ignored. 542 00:31:27,320 --> 00:31:33,680 Speaker 1: The markets are complacent about changes in rules, Dodd Frank 543 00:31:33,720 --> 00:31:36,280 Speaker 1: and all that. Yes, so we're gonna have two types 544 00:31:36,280 --> 00:31:38,480 Speaker 1: of money market funds. You've talked about that in the 545 00:31:38,560 --> 00:31:41,360 Speaker 1: United States. We are only six weeks away from that. 546 00:31:42,000 --> 00:31:44,760 Speaker 1: When we do, there'll be those that will service the 547 00:31:44,880 --> 00:31:49,640 Speaker 1: private sector, lieboard based, and those that are in treasury 548 00:31:49,680 --> 00:31:53,480 Speaker 1: bills and don't break the buck. We have Bossle three, 549 00:31:53,560 --> 00:31:57,360 Speaker 1: which is reconstructed what banks have to do. And these 550 00:31:57,400 --> 00:32:01,080 Speaker 1: complicate these are very complicated struck jeers, and they are 551 00:32:01,360 --> 00:32:05,200 Speaker 1: impacting the stability of the financial system because they are 552 00:32:05,400 --> 00:32:10,080 Speaker 1: widening the credit spreads. Widening credit spreads for me, Tom 553 00:32:10,120 --> 00:32:14,040 Speaker 1: and like are a warning bell. They are a yellow light. 554 00:32:14,120 --> 00:32:18,560 Speaker 1: They say watch out. You never have a crisis without 555 00:32:18,600 --> 00:32:23,479 Speaker 1: having first preceded it with widening credit spreads. David kotalk 556 00:32:23,600 --> 00:32:26,880 Speaker 1: very quickly, here are you fully invested even with the 557 00:32:26,920 --> 00:32:30,720 Speaker 1: ballet of the summer of two thousand sixteen. Uh No. 558 00:32:31,440 --> 00:32:34,719 Speaker 1: We went to cash reserves within the last two weeks, 559 00:32:34,840 --> 00:32:37,880 Speaker 1: and we have taken them up and we had a 560 00:32:37,920 --> 00:32:40,920 Speaker 1: great run. We had a great run right after Brexit 561 00:32:40,920 --> 00:32:43,800 Speaker 1: because we had an entry and we have peeled back 562 00:32:43,960 --> 00:32:47,280 Speaker 1: positions and we have cash reserves in place, and we 563 00:32:47,360 --> 00:32:51,680 Speaker 1: think interest rates generally speaking, are bottoming. Or have batted 564 00:32:52,080 --> 00:32:53,920 Speaker 1: to the two of you. Best of luck in good 565 00:32:53,920 --> 00:32:57,440 Speaker 1: travels to Jackson Hall. Michael McKee. I've been looking at 566 00:32:57,440 --> 00:33:01,800 Speaker 1: Western Montana memos. If the bear charges, your first option 567 00:33:01,880 --> 00:33:05,040 Speaker 1: is to remain standing the bear the bear made, bluff 568 00:33:05,120 --> 00:33:09,760 Speaker 1: charg or run past you. As a last resort, assume 569 00:33:10,240 --> 00:33:14,480 Speaker 1: a cannonball position and play dead, baby Mike. That's what 570 00:33:14,560 --> 00:33:18,840 Speaker 1: Cherry ll will do jets at all, certainly when she 571 00:33:18,880 --> 00:33:22,600 Speaker 1: sees the press coming Tom, Mike and I are exchanging 572 00:33:22,600 --> 00:33:25,400 Speaker 1: how fast we can run. We have decided it's not 573 00:33:25,440 --> 00:33:28,280 Speaker 1: outrunning the bear. Of course, a too can outrun each other. 574 00:33:29,280 --> 00:33:33,240 Speaker 1: Counts here, uh, David? If the bear charges, they wreck. 575 00:33:33,400 --> 00:33:37,920 Speaker 1: The authorities recommend carrying a Caynne pepper spray for you. 576 00:33:37,920 --> 00:33:42,480 Speaker 1: You can sprinkle pet prisca across the field, David Kotak, 577 00:33:42,840 --> 00:33:46,480 Speaker 1: watch out for grizz from Montana. From New York, this 578 00:33:46,560 --> 00:34:01,120 Speaker 1: is Bloomberg. The f h A house pricing next comes 579 00:34:01,160 --> 00:34:04,880 Speaker 1: in a touch below analyst expectations of two tents rise. 580 00:34:04,920 --> 00:34:07,760 Speaker 1: Mortgage applications were down two point one percent. It is 581 00:34:08,000 --> 00:34:11,839 Speaker 1: definitely housing week yesterday a twelve percent rise in new 582 00:34:11,840 --> 00:34:15,359 Speaker 1: home sales really surprising analysts who had forecasts at two 583 00:34:15,360 --> 00:34:19,880 Speaker 1: tenths percent decline. Today's number existing home sales there forecast 584 00:34:20,000 --> 00:34:23,240 Speaker 1: to be down one point one percent to a five million, 585 00:34:23,360 --> 00:34:28,439 Speaker 1: five thousand annual rate. Will we get a surprise today? Well? 586 00:34:28,440 --> 00:34:31,160 Speaker 1: Here with us at Camp Kotok in the mountains of 587 00:34:31,840 --> 00:34:35,800 Speaker 1: Montana is Doug Duncan. He's the chief economist for Fannie 588 00:34:35,840 --> 00:34:40,160 Speaker 1: may Um. Is it harder to come up with a 589 00:34:40,280 --> 00:34:43,160 Speaker 1: forecast for what's going to happen in the summer months 590 00:34:43,160 --> 00:34:45,640 Speaker 1: when people go on vacation. I mean spring is the 591 00:34:45,640 --> 00:34:48,399 Speaker 1: selling season, and now we're kind of getting into where 592 00:34:48,400 --> 00:34:50,719 Speaker 1: you have to seasonally adjust the numbers to figure out 593 00:34:50,760 --> 00:34:55,520 Speaker 1: what's going on. Yeah, it's uh. People buy homes according 594 00:34:55,560 --> 00:34:58,560 Speaker 1: to the pace of their life, and typically families who 595 00:34:58,640 --> 00:35:01,040 Speaker 1: have kids that are school aged like to make the 596 00:35:01,440 --> 00:35:03,440 Speaker 1: moving plan early in the summer so that they're in 597 00:35:03,480 --> 00:35:06,319 Speaker 1: position for school. Uh. And it takes a little time 598 00:35:06,320 --> 00:35:09,439 Speaker 1: to close mortgages and move families and stuff. So we're 599 00:35:09,520 --> 00:35:13,040 Speaker 1: past the seasonal peak. There's an interesting question on the 600 00:35:13,120 --> 00:35:16,480 Speaker 1: seasonality related to demographics. Right now, you have a younger 601 00:35:16,520 --> 00:35:20,880 Speaker 1: age cohort that may may be moving into ownership and 602 00:35:21,040 --> 00:35:23,840 Speaker 1: might not have the full sized families, and so the 603 00:35:23,920 --> 00:35:25,799 Speaker 1: kinds of properties that they're buying might be a little 604 00:35:25,800 --> 00:35:28,319 Speaker 1: bit different. But it is you really do have to 605 00:35:28,360 --> 00:35:31,799 Speaker 1: follow the seasonal patterns. So these numbers are consistent with 606 00:35:31,800 --> 00:35:34,680 Speaker 1: our forecast. Our forecast for the year is new home 607 00:35:34,719 --> 00:35:38,279 Speaker 1: sales up about eleven house prices up a little north 608 00:35:38,320 --> 00:35:40,880 Speaker 1: of five percent across the course of the year. Existing 609 00:35:40,920 --> 00:35:43,359 Speaker 1: homes up about three and a half percent, So none 610 00:35:43,360 --> 00:35:46,680 Speaker 1: of this is surprising to us. The new home sales 611 00:35:46,760 --> 00:35:49,640 Speaker 1: number was higher than people expected, but those numbers get 612 00:35:49,640 --> 00:35:53,880 Speaker 1: revised pretty significantly in subsequent months, so we're not ready 613 00:35:53,880 --> 00:35:57,440 Speaker 1: to say this is a breakout. Well, the question we've 614 00:35:57,480 --> 00:35:59,239 Speaker 1: been asking, I mean, people have been talking about it 615 00:35:59,280 --> 00:36:02,399 Speaker 1: here at Camp Kok, Talk West and people are talking 616 00:36:02,400 --> 00:36:05,400 Speaker 1: about it, and we've been telling on the show we're 617 00:36:05,440 --> 00:36:09,239 Speaker 1: seven two years into the recovery, depending on when you 618 00:36:09,280 --> 00:36:14,880 Speaker 1: count the beginning. Has housing gotten back to normal? We 619 00:36:14,920 --> 00:36:17,959 Speaker 1: would say that to that, No, Um, there's a couple 620 00:36:17,960 --> 00:36:19,799 Speaker 1: of different ways you can look at that. We look 621 00:36:19,840 --> 00:36:22,640 Speaker 1: at the ratio of existing homes to new homes sold, 622 00:36:22,760 --> 00:36:27,000 Speaker 1: and for forty years there were five point five existing 623 00:36:27,040 --> 00:36:30,319 Speaker 1: home sold per new home sold. Today that ratio is 624 00:36:30,440 --> 00:36:35,120 Speaker 1: down from fifteen to eight and a half roughly, So 625 00:36:35,239 --> 00:36:38,120 Speaker 1: until it gets down to five point five from our perspective, 626 00:36:38,120 --> 00:36:39,960 Speaker 1: we won't be normal. Another way to look at that 627 00:36:40,520 --> 00:36:46,160 Speaker 1: is the new home construction per thousand households, which that 628 00:36:46,160 --> 00:36:48,799 Speaker 1: that rise in new home construction is only up to 629 00:36:48,880 --> 00:36:53,120 Speaker 1: the bottom of the two previous recessions. So the big 630 00:36:53,239 --> 00:36:58,520 Speaker 1: question today is supply, particularly at the entry level home level. 631 00:36:59,400 --> 00:37:02,120 Speaker 1: What the reason you're saying these five percent price increases 632 00:37:02,200 --> 00:37:04,360 Speaker 1: is there simply isn't supply at the low end of 633 00:37:04,360 --> 00:37:08,120 Speaker 1: the market. In some California markets, one month supply normal 634 00:37:08,440 --> 00:37:11,799 Speaker 1: is five and a half six months. Doug, you went 635 00:37:11,920 --> 00:37:14,600 Speaker 1: right where I want to go, Miles oudland over at 636 00:37:14,600 --> 00:37:18,880 Speaker 1: b I quoted Ralph McLaughlin of Trulia, the number of 637 00:37:19,000 --> 00:37:24,000 Speaker 1: starter homes has declined fort in the past four years. 638 00:37:24,400 --> 00:37:26,680 Speaker 1: You're one of the straightest talkers in this. I know 639 00:37:27,400 --> 00:37:31,880 Speaker 1: what is the public policy prescription to bring a housing 640 00:37:32,000 --> 00:37:36,680 Speaker 1: back to America from being a rich guys trading sport. Well, 641 00:37:36,719 --> 00:37:40,080 Speaker 1: I think that if you talk to people UH in 642 00:37:40,120 --> 00:37:42,640 Speaker 1: the that are in the food chain that creates homes, 643 00:37:42,680 --> 00:37:45,440 Speaker 1: what you find is for people that buy land and 644 00:37:45,560 --> 00:37:50,239 Speaker 1: prepare land for construction, costs are up tremendously based on 645 00:37:50,840 --> 00:37:56,960 Speaker 1: local UH and national factors, things like environmental development fees, 646 00:37:57,800 --> 00:38:02,640 Speaker 1: local assessments for supportive things like schools and things like that, 647 00:38:03,880 --> 00:38:07,320 Speaker 1: a significant increase in regulation. Part of it's a response 648 00:38:07,360 --> 00:38:12,239 Speaker 1: to the crisis where communities saw significant vacant homes and 649 00:38:12,360 --> 00:38:16,600 Speaker 1: all of the problems that come with large swats of vacancy. 650 00:38:16,719 --> 00:38:18,560 Speaker 1: So part of it's a local response, part of it's 651 00:38:18,600 --> 00:38:23,040 Speaker 1: a national response. If you talk to two builders, it's 652 00:38:23,200 --> 00:38:26,400 Speaker 1: at the share of them that are reporting access to 653 00:38:26,520 --> 00:38:30,799 Speaker 1: skilled labor as their biggest problem is actually increasing. And 654 00:38:30,840 --> 00:38:33,520 Speaker 1: if you think about it, if you're trying to increase supply, 655 00:38:33,920 --> 00:38:37,279 Speaker 1: so each company is trying to expand. The more you 656 00:38:37,320 --> 00:38:39,680 Speaker 1: try to expand, the more you're gonna need that skilled labor. 657 00:38:40,080 --> 00:38:43,879 Speaker 1: And it's simply isn't It takes time to build that 658 00:38:44,040 --> 00:38:47,640 Speaker 1: part of the of the process, and that's the biggest 659 00:38:47,800 --> 00:38:51,680 Speaker 1: constraint for the builders. So from a public policy perspective, 660 00:38:51,920 --> 00:38:54,600 Speaker 1: deregulation is going to be something that you're going to hear. 661 00:38:54,760 --> 00:39:00,319 Speaker 1: The the question about permissions for development uh and the 662 00:39:00,400 --> 00:39:02,560 Speaker 1: and the permitting process. That's going to be part of 663 00:39:02,560 --> 00:39:08,080 Speaker 1: what you're gonna hear. Do we want to spur housing 664 00:39:08,160 --> 00:39:12,760 Speaker 1: LT or spur home ownership rate higher? Given what happened 665 00:39:12,840 --> 00:39:16,080 Speaker 1: in the early aughts, Well, I think I think the 666 00:39:16,120 --> 00:39:19,160 Speaker 1: best public policy with regard to what's the proper home 667 00:39:19,160 --> 00:39:22,480 Speaker 1: ownership rate is it's the home ownership rate at which 668 00:39:22,840 --> 00:39:26,640 Speaker 1: everyone who is credit qualified in other words, has the 669 00:39:26,719 --> 00:39:31,359 Speaker 1: financial wherewithal and has demonstrated the credit management behavior and 670 00:39:31,440 --> 00:39:34,080 Speaker 1: wants to own a home can't own a home. So 671 00:39:34,200 --> 00:39:37,479 Speaker 1: it's it's kind of that simple, which implies not really 672 00:39:37,520 --> 00:39:42,040 Speaker 1: a subsidy structure to it, but rather simply, Uh, people 673 00:39:42,040 --> 00:39:44,840 Speaker 1: who are willing and able are able to get access 674 00:39:44,880 --> 00:39:48,080 Speaker 1: to buy a hare? Are we? Uh? What progress has 675 00:39:48,120 --> 00:39:51,520 Speaker 1: been made on the access to credit part? I mean 676 00:39:51,560 --> 00:39:53,720 Speaker 1: it's it's been very hard for people to get loans. 677 00:39:53,800 --> 00:39:55,560 Speaker 1: You have to have a really high fi CO score. 678 00:39:55,960 --> 00:39:59,760 Speaker 1: Is that improving? Well, there's Uh, there has been some easing, 679 00:40:00,040 --> 00:40:04,360 Speaker 1: but not dramatic easing. We survey lenders on a quarterly basis, 680 00:40:04,880 --> 00:40:07,520 Speaker 1: and for a couple of years they were saying yes, 681 00:40:07,560 --> 00:40:10,440 Speaker 1: we intend to and we did see some easing of 682 00:40:10,520 --> 00:40:13,279 Speaker 1: credit standards. That's sort of flattened out now, So I 683 00:40:13,320 --> 00:40:15,880 Speaker 1: think uh lenders have gotten to where they think the 684 00:40:15,920 --> 00:40:20,400 Speaker 1: regulatory process will accept the limits of credit easing. So 685 00:40:20,440 --> 00:40:22,720 Speaker 1: I don't I don't see a lot of that going forward. 686 00:40:23,160 --> 00:40:26,520 Speaker 1: That's a frustration to some people. UM, and you're going 687 00:40:26,560 --> 00:40:29,759 Speaker 1: to hear a discussion of that, I think continued. That's 688 00:40:29,760 --> 00:40:34,440 Speaker 1: a that's a flashpoint between uh, the folks who are 689 00:40:34,560 --> 00:40:38,400 Speaker 1: focused on safety and soundness and the focus on access 690 00:40:38,440 --> 00:40:41,279 Speaker 1: to credits. I think you'll continue here that discussion. But 691 00:40:41,840 --> 00:40:44,640 Speaker 1: I think you've seen some easing, probably not a lot 692 00:40:44,680 --> 00:40:48,160 Speaker 1: more coming in the near term. The next president, whomever 693 00:40:48,320 --> 00:40:50,600 Speaker 1: it is, is going to be confronted with the idea 694 00:40:50,640 --> 00:40:53,600 Speaker 1: of tax reform. And the biggest tax break that is 695 00:40:53,640 --> 00:40:56,240 Speaker 1: in the center of every debate is the home mortgage deduction. 696 00:40:57,200 --> 00:41:00,120 Speaker 1: Do you think that really becomes an issue or is 697 00:41:00,160 --> 00:41:06,200 Speaker 1: that so widely used now or or so um embedded 698 00:41:06,360 --> 00:41:09,520 Speaker 1: in the home ownership process that we're not going to 699 00:41:09,600 --> 00:41:13,320 Speaker 1: see that go away. I think it's unlikely that you 700 00:41:13,360 --> 00:41:17,360 Speaker 1: would see it eliminated. I think it's somewhat more likely 701 00:41:17,480 --> 00:41:21,400 Speaker 1: that you could see it curtailed at the limits. For example, 702 00:41:22,280 --> 00:41:26,080 Speaker 1: some there's been some discussion of eliminating the deductibility of 703 00:41:27,120 --> 00:41:32,880 Speaker 1: home equity loan interest payments or the maximum size of 704 00:41:32,960 --> 00:41:36,359 Speaker 1: mortgage on which you can deducted interest expenses. So those 705 00:41:36,360 --> 00:41:39,840 Speaker 1: are those would be more likely to get some discussion, 706 00:41:39,880 --> 00:41:43,280 Speaker 1: But it's it's embedded sort of in the middle class, 707 00:41:43,840 --> 00:41:46,359 Speaker 1: if you will. Um. One of the interesting things is 708 00:41:46,960 --> 00:41:51,719 Speaker 1: it's often sold as an entry a first time HomeBuyer advantagement. 709 00:41:51,800 --> 00:41:54,600 Speaker 1: In fact, most people are who are first time homebarks, 710 00:41:54,640 --> 00:41:58,200 Speaker 1: particularly lower income households, don't itemize, and so it actually 711 00:41:58,320 --> 00:42:00,560 Speaker 1: have no benefit. You can actually look at the at 712 00:42:00,600 --> 00:42:03,879 Speaker 1: the tax rolls and see that lower income households don't 713 00:42:03,880 --> 00:42:06,840 Speaker 1: ademize and therefore they don't use the mortgage interest deduction, 714 00:42:07,200 --> 00:42:12,839 Speaker 1: so it's not really a spur to uh for entry lising. 715 00:42:13,560 --> 00:42:17,960 Speaker 1: Doug duncan thank you so much. Thanks with perspective on 716 00:42:17,960 --> 00:42:19,600 Speaker 1: a housie, Mike McKie, what do you do when the 717 00:42:19,600 --> 00:42:23,200 Speaker 1: show's over? Like do you have your trout? Like what 718 00:42:23,239 --> 00:42:24,960 Speaker 1: do you call him? Waiters? Do you have them on? 719 00:42:25,880 --> 00:42:28,200 Speaker 1: Right now? On and ready to go to I gotta 720 00:42:28,200 --> 00:42:30,520 Speaker 1: put on wet shoes this morning, which is always addressing. 721 00:42:31,360 --> 00:42:33,680 Speaker 1: I mean, Pim Fox and I. The closest Pim Fox 722 00:42:33,719 --> 00:42:38,280 Speaker 1: and I have ever come to fishing is that pond 723 00:42:38,320 --> 00:42:40,680 Speaker 1: in Central Park that's in all the Woody Yellen movies 724 00:42:41,200 --> 00:42:44,879 Speaker 1: like Pim basically Pim You know that that pond as 725 00:42:45,000 --> 00:42:47,040 Speaker 1: that lake or whatever they call it has to be 726 00:42:47,080 --> 00:42:50,279 Speaker 1: in every Woody Yellen movie. It does. But I gotta say, no, 727 00:42:50,400 --> 00:42:53,080 Speaker 1: that's not I actually lived used to live in Bozeman, 728 00:42:53,120 --> 00:42:58,600 Speaker 1: Montanas on and on, and I just gotta say, there's 729 00:42:58,600 --> 00:43:02,160 Speaker 1: a big problem there be us. They're no fish. There's 730 00:43:02,200 --> 00:43:05,520 Speaker 1: a parasite. Michael McKee, you're way up on this, say 731 00:43:05,880 --> 00:43:10,239 Speaker 1: I am dazzled anything, but I was there that the 732 00:43:10,280 --> 00:43:13,320 Speaker 1: pim Fox of midtown Manhattan is totally up to speed 733 00:43:14,080 --> 00:43:18,040 Speaker 1: on this serious issue of parasites and Yellowstone River. Michael 734 00:43:18,080 --> 00:43:21,600 Speaker 1: McKee in Montana and Wyoming. Mr McKee rumored to be 735 00:43:21,640 --> 00:43:25,160 Speaker 1: heading towards Wyoming. We will continue tomorrow. We need you 736 00:43:25,239 --> 00:43:29,960 Speaker 1: here tomorrow on economics, finance, and investment. This is Bloomberg. 737 00:43:32,440 --> 00:43:36,560 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 738 00:43:36,600 --> 00:43:42,000 Speaker 1: listen to interviews on iTunes, SoundCloud, or whichever podcast platform 739 00:43:42,080 --> 00:43:46,160 Speaker 1: you prefer. I'm on Twitter at Tom Keane. Michael McKee 740 00:43:46,239 --> 00:43:49,840 Speaker 1: is at Economy. Before the podcast, you can always catch 741 00:43:49,920 --> 00:43:59,919 Speaker 1: us worldwide. I'm Bloomberg Radio. Who you put your truck 742 00:44:00,000 --> 00:44:04,640 Speaker 1: Ston Matters. Investors have put their trust in independent registered 743 00:44:04,640 --> 00:44:09,040 Speaker 1: investment advisors to the tune of four trillion dollars. Why 744 00:44:09,280 --> 00:44:14,879 Speaker 1: learn more and find your independent advisor dot com