1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 2 00:00:13,960 --> 00:00:17,560 Speaker 1: we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,040 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Right now, 5 00:00:28,120 --> 00:00:32,720 Speaker 1: someone that I enjoy immensely having in always and it 6 00:00:32,800 --> 00:00:35,760 Speaker 1: can be on any number of themes with someone. Uh, 7 00:00:35,840 --> 00:00:38,680 Speaker 1: this is Stuart. His name is Ben Carson. He's some 8 00:00:38,800 --> 00:00:44,519 Speaker 1: Detroit with a interesting childhood, an outstanding medical career, and 9 00:00:44,520 --> 00:00:47,600 Speaker 1: then he wandered into politics and that is now the 10 00:00:47,720 --> 00:00:51,120 Speaker 1: Secretary for Housing and Urban Development. We're thrilled the hot 11 00:00:51,159 --> 00:00:54,480 Speaker 1: Secretary Ben Carson can join us this morning. Wonderful to 12 00:00:54,520 --> 00:00:57,360 Speaker 1: have you with us again. Not a politician. Mr said, well, 13 00:00:57,360 --> 00:00:59,120 Speaker 1: I know you're not a baltime, but you have to 14 00:00:59,200 --> 00:01:02,840 Speaker 1: deal with him. I want to begin on a direct note, 15 00:01:02,880 --> 00:01:06,440 Speaker 1: which is, of course, this nation is riveted by all 16 00:01:06,560 --> 00:01:11,360 Speaker 1: that's occurred, and everyone has a different opinion. Very few 17 00:01:11,440 --> 00:01:19,160 Speaker 1: of us actually understand the damage these guns cause. You 18 00:01:19,440 --> 00:01:21,840 Speaker 1: were at Johns Hopkins out of the University of Michigan, 19 00:01:22,319 --> 00:01:26,720 Speaker 1: wandered over to Johns Hopkins. When did you first stand there? 20 00:01:26,760 --> 00:01:30,680 Speaker 1: In an operating room looking at what some of these 21 00:01:30,720 --> 00:01:36,320 Speaker 1: firearms can can harm us well as an intern. Uh. 22 00:01:36,520 --> 00:01:40,120 Speaker 1: Right in the middle of the city and the emergency rooms, 23 00:01:40,400 --> 00:01:43,960 Speaker 1: you would see people come in with just horrendous wounds 24 00:01:44,280 --> 00:01:47,680 Speaker 1: and Uh. In many cases they were people who weren't 25 00:01:47,680 --> 00:01:52,880 Speaker 1: directly involved in the conflict. They were bystanders. And sometimes 26 00:01:52,880 --> 00:01:55,400 Speaker 1: I had to deal with children who were bystanders who 27 00:01:55,480 --> 00:01:59,160 Speaker 1: had gunshot wounds to the head. Uh. It's it's devastating 28 00:01:59,360 --> 00:02:02,800 Speaker 1: the impact act. Even though often we're able to save 29 00:02:02,840 --> 00:02:06,680 Speaker 1: their lives, you know, they have a lifelong impact from 30 00:02:07,000 --> 00:02:10,760 Speaker 1: brain damage. What we've seen in the last number of days, 31 00:02:10,760 --> 00:02:13,480 Speaker 1: including the president's press conferences, he went out to the 32 00:02:13,520 --> 00:02:16,200 Speaker 1: helicopter to go to DAT and to go to El Paso. 33 00:02:16,480 --> 00:02:20,359 Speaker 1: Is a president, whatever anybody's politics, he's struggling with this 34 00:02:20,480 --> 00:02:25,840 Speaker 1: issue like anyone else. Clearly more than anyone in the administration, 35 00:02:26,200 --> 00:02:29,239 Speaker 1: you have an immediacy to this topic. What is your 36 00:02:29,280 --> 00:02:34,720 Speaker 1: prescription to get us to some form of sanity to 37 00:02:34,919 --> 00:02:39,120 Speaker 1: avoid this horrific multiple deaths. Well, you know, we have 38 00:02:39,200 --> 00:02:43,160 Speaker 1: to be quite analytical here. Um. You know, the knee 39 00:02:43,200 --> 00:02:45,600 Speaker 1: jerk reaction is, oh, we've got to get rid of 40 00:02:45,639 --> 00:02:48,000 Speaker 1: the guns, and that will solve the problem. It's that's 41 00:02:48,120 --> 00:02:50,400 Speaker 1: that's not the problem. They've been guns for hundreds of 42 00:02:50,480 --> 00:02:55,200 Speaker 1: years here. What there hasn't been is a society where 43 00:02:55,320 --> 00:03:00,280 Speaker 1: people have sort of lost their moral compass and lost 44 00:03:00,320 --> 00:03:05,560 Speaker 1: their identity. And there's so much of what made America 45 00:03:05,560 --> 00:03:08,680 Speaker 1: into a great nation that we no longer like to 46 00:03:08,720 --> 00:03:12,680 Speaker 1: talk about. The can do attitude, uh, the belief system 47 00:03:13,200 --> 00:03:16,000 Speaker 1: about doing good to the others. I can agree with 48 00:03:16,040 --> 00:03:19,160 Speaker 1: all that, Mr Secretary. We had that can do attitude 49 00:03:19,600 --> 00:03:24,959 Speaker 1: with an Ithaca shotgunner or five shot Winchester magnum that 50 00:03:25,160 --> 00:03:28,160 Speaker 1: had one or two or maybe the big thing was 51 00:03:28,240 --> 00:03:31,799 Speaker 1: five bullets in the cartridge. Were now dealing with massive 52 00:03:31,840 --> 00:03:38,000 Speaker 1: technological arms which you and other surgeoncy every day in 53 00:03:38,000 --> 00:03:42,560 Speaker 1: in our in our wards nationwide. Has the technology overcome 54 00:03:42,960 --> 00:03:45,920 Speaker 1: our moral compass? Uh? No, I don't. I don't think 55 00:03:45,920 --> 00:03:49,240 Speaker 1: it's the technology. I think it's what's happened to us 56 00:03:49,320 --> 00:03:53,160 Speaker 1: as human beings. You know, you have people now you'll 57 00:03:53,200 --> 00:03:55,320 Speaker 1: notice as soon as they sit down, what did they do? 58 00:03:55,960 --> 00:03:59,360 Speaker 1: They pull up their phone, you know, and they start 59 00:03:59,440 --> 00:04:01,520 Speaker 1: looking at and then when they get home. I saw 60 00:04:01,600 --> 00:04:05,600 Speaker 1: some statistics lately about how much time people spend uh, 61 00:04:05,640 --> 00:04:09,320 Speaker 1: you know, with social media and with video games and 62 00:04:09,360 --> 00:04:12,400 Speaker 1: things of that nature, rather than spending time with other 63 00:04:12,480 --> 00:04:16,880 Speaker 1: human beings and developing relationships. And even in families, you 64 00:04:16,880 --> 00:04:21,000 Speaker 1: don't you don't sit down and have dinner together and 65 00:04:21,160 --> 00:04:25,760 Speaker 1: talk about what's going on. And I think it removes 66 00:04:25,800 --> 00:04:28,760 Speaker 1: people from reality and it helps you to dehumanize other 67 00:04:28,839 --> 00:04:32,320 Speaker 1: human beings. That's that's the real problem now, is it 68 00:04:32,360 --> 00:04:35,760 Speaker 1: Is it terrible when you have the ability to kill 69 00:04:35,839 --> 00:04:38,120 Speaker 1: a lot of people? Of course it is, But we 70 00:04:38,160 --> 00:04:40,839 Speaker 1: need to get back again to the basics of why 71 00:04:40,920 --> 00:04:43,479 Speaker 1: people are doing this. Ben Carson with us. Here is 72 00:04:43,520 --> 00:04:47,800 Speaker 1: the Secretary Paul Sweetey. Yes, so, Secretary Carson, thanks so 73 00:04:47,839 --> 00:04:49,719 Speaker 1: much for being with us. Give us a sense. I 74 00:04:49,760 --> 00:04:53,280 Speaker 1: know you're in town for the opportunity zone discussion. Give 75 00:04:53,360 --> 00:04:55,760 Speaker 1: us a sense, give our listeners a sense of what 76 00:04:55,839 --> 00:04:59,720 Speaker 1: opportunity zones are, what they're intended to do, and are 77 00:04:59,760 --> 00:05:04,760 Speaker 1: they working. Yes. Opportunity zones were created as an out 78 00:05:05,400 --> 00:05:10,039 Speaker 1: cropping of the seventeen Tax Cuts and Jobs Act and UH. 79 00:05:10,080 --> 00:05:13,480 Speaker 1: They provide the governors of all fifty states as well 80 00:05:13,480 --> 00:05:18,400 Speaker 1: as five territories, the ability to designate their economically distressed 81 00:05:18,440 --> 00:05:24,640 Speaker 1: areas as opportunity zones into which people can invest unrealized 82 00:05:24,760 --> 00:05:28,159 Speaker 1: capital gains. And if you leave them in long term, 83 00:05:28,200 --> 00:05:31,760 Speaker 1: you get some very substantial benefits. Uh. If you leave 84 00:05:31,800 --> 00:05:34,320 Speaker 1: them in for five years, ten percent decrement on the 85 00:05:34,360 --> 00:05:38,520 Speaker 1: capital gains old on the original investment, if you leave 86 00:05:38,560 --> 00:05:40,120 Speaker 1: it in for seven years, if you leave it in 87 00:05:40,160 --> 00:05:44,000 Speaker 1: for ten years, there's no capital gains that you have 88 00:05:44,080 --> 00:05:46,560 Speaker 1: to pay on the new money that was realized with 89 00:05:46,680 --> 00:05:50,760 Speaker 1: result of investment. So it's a significant inducement. And uh, 90 00:05:50,800 --> 00:05:53,039 Speaker 1: you know, some people have complained that it's just a 91 00:05:53,080 --> 00:05:55,120 Speaker 1: mechanism for rich people to get richer, but of course 92 00:05:55,200 --> 00:05:57,120 Speaker 1: rich people are gonna get richer anyway because they're gonna 93 00:05:57,120 --> 00:06:00,240 Speaker 1: invest their money somewhere. So why not induced them to 94 00:06:00,320 --> 00:06:04,680 Speaker 1: invest into the areas that traditionally are economically deprived. And 95 00:06:04,760 --> 00:06:08,479 Speaker 1: you know, this money can be used, you know, to 96 00:06:08,600 --> 00:06:12,560 Speaker 1: buy things and these zones, to invest in things in 97 00:06:12,680 --> 00:06:16,440 Speaker 1: these zones, to invest in stocks associated with things in 98 00:06:16,480 --> 00:06:19,720 Speaker 1: these zones, the whole host of a variety of things 99 00:06:19,800 --> 00:06:25,120 Speaker 1: and are used uh frequently as the bridging funding uh 100 00:06:25,240 --> 00:06:29,960 Speaker 1: for projects. So uh, it's a tremendous opportunity. We've already 101 00:06:30,040 --> 00:06:37,159 Speaker 1: seen uh more than forty nine billion dollars, and I 102 00:06:37,200 --> 00:06:39,320 Speaker 1: think it's just going to continue to increase. And I've 103 00:06:39,360 --> 00:06:43,159 Speaker 1: already seen a number of projects around the country that 104 00:06:43,240 --> 00:06:46,960 Speaker 1: have been facilitated through the Opportunity Zone. So do we 105 00:06:47,000 --> 00:06:53,000 Speaker 1: have evidence that these investments are creating jobs or increasing 106 00:06:53,640 --> 00:06:57,520 Speaker 1: real estate values in some of these difficult urban areas, 107 00:06:57,600 --> 00:07:00,680 Speaker 1: or just you know, uh economic challenge. Well, you know, 108 00:07:00,760 --> 00:07:04,680 Speaker 1: I've I've I've talked to some of the people who 109 00:07:04,720 --> 00:07:07,919 Speaker 1: have been able to obtain some jobs, some of the 110 00:07:08,000 --> 00:07:12,760 Speaker 1: young men, and uh, I was just really impressed by them, saying, 111 00:07:13,280 --> 00:07:16,080 Speaker 1: we didn't believe that this was ever going to happen 112 00:07:16,120 --> 00:07:18,520 Speaker 1: for us. But I've we've been taught some various skills 113 00:07:18,560 --> 00:07:23,960 Speaker 1: like how to reinstall windows and painting and landscaping, and 114 00:07:24,040 --> 00:07:28,520 Speaker 1: it completely changes their outlook. It's one of the reasons 115 00:07:28,600 --> 00:07:30,960 Speaker 1: that we've spent a lot of time on Section three. 116 00:07:31,040 --> 00:07:34,560 Speaker 1: Section three of the Housing Acts says that if you're 117 00:07:34,600 --> 00:07:38,480 Speaker 1: getting hard funding, you have an obligation to hire, train, 118 00:07:38,760 --> 00:07:42,000 Speaker 1: or give contracts to the low income people in those areas. 119 00:07:42,280 --> 00:07:45,160 Speaker 1: Been on the books for fifty years, hardly been used 120 00:07:45,480 --> 00:07:48,920 Speaker 1: because it's onerous, it's very difficult to use. So we've 121 00:07:49,040 --> 00:07:51,800 Speaker 1: changed that the new rules will be coming out very shortly. 122 00:07:52,400 --> 00:07:55,480 Speaker 1: Um and if you can give people those skills, they 123 00:07:55,520 --> 00:07:58,680 Speaker 1: can climb that ladder and the other thing is removed, 124 00:07:58,760 --> 00:08:02,360 Speaker 1: the obstacles like if you make more money, you have 125 00:08:02,440 --> 00:08:06,120 Speaker 1: to pay more rent. I don't care, Secretary Carson, is 126 00:08:06,160 --> 00:08:08,360 Speaker 1: only one thing I care about, and I'm honored that 127 00:08:08,400 --> 00:08:11,400 Speaker 1: you're here with our Michael Barr. What don't you what 128 00:08:11,560 --> 00:08:14,679 Speaker 1: hud going to do about the Detroit Tigers their record 129 00:08:14,760 --> 00:08:18,360 Speaker 1: this year? Can you help me with your Detroit Tigers. 130 00:08:18,400 --> 00:08:23,080 Speaker 1: You're not worse than the os, You're You're ended on 131 00:08:23,160 --> 00:08:26,640 Speaker 1: all silies this year. Very good, Ben Carson, thank you 132 00:08:26,680 --> 00:08:30,000 Speaker 1: so much with this fandom of the Baltimore Orioles and 133 00:08:30,040 --> 00:08:32,679 Speaker 1: that my mster Bartie have any words for the Secretary 134 00:08:32,760 --> 00:08:35,640 Speaker 1: on what we do with the Tigers this year. Mr Carson, 135 00:08:35,640 --> 00:08:37,480 Speaker 1: I'm so glad you're here to help me out. I 136 00:08:37,520 --> 00:08:41,440 Speaker 1: appreciate Ben Carson, thank you so much. He is out 137 00:08:41,480 --> 00:08:45,880 Speaker 1: in support with the president of Opportunity Zones. They are 138 00:08:45,920 --> 00:08:50,520 Speaker 1: a program to jump start certain parts of geographies around 139 00:08:50,520 --> 00:08:53,520 Speaker 1: American We thank him for his comments on the real 140 00:08:53,640 --> 00:08:58,520 Speaker 1: challenges of Opasso and Dayton as well. Secretary Carson, thank 141 00:08:58,559 --> 00:09:15,360 Speaker 1: you Johnny around Temple with Lazard asset Management. We are 142 00:09:15,480 --> 00:09:18,320 Speaker 1: thrilled these with us because he pulls in not only 143 00:09:18,400 --> 00:09:21,800 Speaker 1: analysis of equity markets across that asset work as well, 144 00:09:22,400 --> 00:09:26,520 Speaker 1: but were the real take on the international economy. Let 145 00:09:26,520 --> 00:09:32,199 Speaker 1: me start with your clients, your your your investors. What 146 00:09:32,240 --> 00:09:34,760 Speaker 1: are they saying right now? What are they saying after 147 00:09:34,800 --> 00:09:37,800 Speaker 1: this early August that we've seen. I think clients are 148 00:09:37,800 --> 00:09:39,719 Speaker 1: still trying to figure out what which well, they're trying 149 00:09:39,760 --> 00:09:42,480 Speaker 1: to figure out how to disentangle a lot of conflicting signals. 150 00:09:42,480 --> 00:09:44,120 Speaker 1: That they look and see an economy in the U 151 00:09:44,160 --> 00:09:46,760 Speaker 1: S that's doing really reasonably well. They see the household 152 00:09:46,760 --> 00:09:49,400 Speaker 1: finances looking good. They see a consumer economy the US 153 00:09:49,480 --> 00:09:52,199 Speaker 1: always keep in mind seventy percent of GDPs consumption, so 154 00:09:52,240 --> 00:09:55,040 Speaker 1: they see positive signals there. They see a FED that 155 00:09:55,120 --> 00:09:56,760 Speaker 1: a year ago looked like it was on track to 156 00:09:56,760 --> 00:09:59,640 Speaker 1: make a policy mistake, that was talking very hawkishly about 157 00:09:59,679 --> 00:10:02,400 Speaker 1: how F funds would be a three forty from the 158 00:10:02,440 --> 00:10:05,320 Speaker 1: dot plot. Now they've got a FED that's basically saying, okay, 159 00:10:05,360 --> 00:10:07,280 Speaker 1: we realized we might have made a mistake. Without saying 160 00:10:07,280 --> 00:10:10,319 Speaker 1: those words were in a mid cycle adjustment, so easing policy, 161 00:10:10,320 --> 00:10:12,199 Speaker 1: They've got an ECB that teasing, so they've got a 162 00:10:12,280 --> 00:10:14,679 Speaker 1: lot of positive signals, and yet they have a trade 163 00:10:14,720 --> 00:10:17,920 Speaker 1: war that continues to get worse. They've got geopolitical risk 164 00:10:18,000 --> 00:10:20,319 Speaker 1: that are very difficult to kind of quantify and react to, 165 00:10:20,840 --> 00:10:23,280 Speaker 1: and they're just trying to figure out whether we're uncharted territory. 166 00:10:23,480 --> 00:10:26,319 Speaker 1: Paul future is a negative twenty one right now exactly. So, 167 00:10:26,720 --> 00:10:28,560 Speaker 1: so Ron, let's talk about the trade war a little bit. 168 00:10:28,600 --> 00:10:31,680 Speaker 1: It doesn't appear that we're going to get any resolution 169 00:10:31,800 --> 00:10:34,400 Speaker 1: in the near maybe even intermediate term. What is your 170 00:10:34,480 --> 00:10:37,720 Speaker 1: sense as you talk to companies in your portfolio about 171 00:10:37,760 --> 00:10:40,280 Speaker 1: what that does to corporate confidence? Is it Is it 172 00:10:40,480 --> 00:10:44,200 Speaker 1: impacting business decision making? Do you think? I think there's 173 00:10:44,240 --> 00:10:47,199 Speaker 1: no question it's impacting business decisions and business confidence and 174 00:10:47,240 --> 00:10:50,040 Speaker 1: the willingness to invest in capex um and by the way, 175 00:10:50,200 --> 00:10:51,559 Speaker 1: invest in hiring. And so this is one of the 176 00:10:51,600 --> 00:10:54,360 Speaker 1: biggest challenges I just mentioned the consumers doing well. What 177 00:10:54,440 --> 00:10:56,319 Speaker 1: we're trying to figure out is how long can you 178 00:10:56,520 --> 00:10:59,320 Speaker 1: head down this negative trajectory on trade? How long can 179 00:10:59,360 --> 00:11:01,920 Speaker 1: you see a glow bull industrial slowdown before that starts 180 00:11:01,960 --> 00:11:04,120 Speaker 1: to translate into lower job growth numbers? And if you 181 00:11:04,160 --> 00:11:05,720 Speaker 1: look at the last three months, we had a hundred 182 00:11:05,760 --> 00:11:08,079 Speaker 1: forty thousand non farm payroll per month. The year to 183 00:11:08,160 --> 00:11:09,880 Speaker 1: day it was a hundred sixty five thousands, so we've 184 00:11:09,880 --> 00:11:13,160 Speaker 1: seen a deceleration. UM. The companies tend to put up 185 00:11:13,160 --> 00:11:15,480 Speaker 1: a brave face and try to act like they're working 186 00:11:15,520 --> 00:11:18,080 Speaker 1: through it, and they have flexibility. I think that's more 187 00:11:18,200 --> 00:11:21,480 Speaker 1: optics and um basically stage management as opposed to reality. 188 00:11:21,600 --> 00:11:23,400 Speaker 1: So so I do think it's a real challenge. But 189 00:11:23,559 --> 00:11:26,960 Speaker 1: so far you haven't seen as many uh anecdotes as 190 00:11:27,000 --> 00:11:28,959 Speaker 1: you might want in terms of trying to put quantification 191 00:11:29,040 --> 00:11:31,000 Speaker 1: around it. And of course the big thing is, you know, 192 00:11:31,360 --> 00:11:33,560 Speaker 1: as we think about the Federal Reserve, and obviously, as 193 00:11:33,600 --> 00:11:36,000 Speaker 1: you mentioned, they're obviously taking a much more doubished tone, 194 00:11:36,400 --> 00:11:39,120 Speaker 1: are you concerned that there might be diminishing returns on 195 00:11:39,440 --> 00:11:42,559 Speaker 1: what the FED does going forward? Well, let's just put 196 00:11:42,600 --> 00:11:44,679 Speaker 1: it this way. Twenty five basis points on FED funds 197 00:11:44,720 --> 00:11:46,760 Speaker 1: won't make you decide to build a new factory, right, 198 00:11:46,800 --> 00:11:48,959 Speaker 1: I mean, so we really think about the quantum here. 199 00:11:49,080 --> 00:11:50,800 Speaker 1: Even if the Fed cuts rates as much as the 200 00:11:50,800 --> 00:11:53,679 Speaker 1: FED funds futures imply, which is another four rate cuts 201 00:11:53,840 --> 00:11:56,760 Speaker 1: by the end of that doesn't offset the lack of 202 00:11:56,800 --> 00:11:59,679 Speaker 1: predictability and the uncertainty arising from trade policy. And I 203 00:11:59,720 --> 00:12:01,559 Speaker 1: should note, by the way, I think the markets aren't 204 00:12:01,600 --> 00:12:04,079 Speaker 1: worried enough about trade. I think actually trade is going 205 00:12:04,120 --> 00:12:06,360 Speaker 1: to be a multi year phenomenon, and I think we're 206 00:12:06,360 --> 00:12:08,880 Speaker 1: going to take a lot of non terriff actions. They're 207 00:12:08,880 --> 00:12:11,240 Speaker 1: gonna surprise investors over the next few years. So what's 208 00:12:11,280 --> 00:12:14,400 Speaker 1: your it's an equity guy. I say this with great respect. 209 00:12:14,520 --> 00:12:18,319 Speaker 1: Run is an equity guy. What's your take on the 210 00:12:18,520 --> 00:12:22,600 Speaker 1: run rate of American GDP? Are you investing assuming sub 211 00:12:22,760 --> 00:12:26,760 Speaker 1: two percent real GDP? I think that's the realistic assessment 212 00:12:26,800 --> 00:12:28,120 Speaker 1: you have to make, because we're gonna have sub two 213 00:12:28,160 --> 00:12:30,160 Speaker 1: percent in the US and hopefully we'll get one percent 214 00:12:30,160 --> 00:12:33,240 Speaker 1: out of Europe, and you'll have deceleration in China. I mean, effectively, 215 00:12:34,080 --> 00:12:36,160 Speaker 1: you know this. I don't want to accept that it's 216 00:12:36,160 --> 00:12:37,719 Speaker 1: the new normal, but this does seem to be a 217 00:12:37,800 --> 00:12:39,800 Speaker 1: normal level of GDP. And we had a one year blip, 218 00:12:39,920 --> 00:12:41,760 Speaker 1: by the way, which you know, if you pull up 219 00:12:41,800 --> 00:12:43,559 Speaker 1: GDP on your Bloomberg chart and look at the last 220 00:12:43,600 --> 00:12:45,839 Speaker 1: ten years, it's hard to find that blip, right, But 221 00:12:46,160 --> 00:12:48,679 Speaker 1: but then swing it back to then what do you 222 00:12:48,920 --> 00:12:52,719 Speaker 1: look for inequities? Is it all about revenue growth? I mean, 223 00:12:52,840 --> 00:12:56,079 Speaker 1: is that the proxy in a sub two percent GDP world? 224 00:12:56,280 --> 00:12:58,120 Speaker 1: My simple back of the envelope is to say, if 225 00:12:58,160 --> 00:13:00,280 Speaker 1: you've got let's say two percent to make the number easy, 226 00:13:00,320 --> 00:13:02,640 Speaker 1: two percent real GDP with one and a half to 227 00:13:02,679 --> 00:13:04,679 Speaker 1: two percent inflation, then I should have somewhere on three 228 00:13:04,679 --> 00:13:07,000 Speaker 1: and a half to four percent revenue growth. Maybe I 229 00:13:07,080 --> 00:13:09,160 Speaker 1: get some operating leverage, even though the labor markets are 230 00:13:09,200 --> 00:13:11,839 Speaker 1: getting tighter, So maybe a little operating margin there, and 231 00:13:11,880 --> 00:13:13,559 Speaker 1: that got shared by back. So it seems to me 232 00:13:13,640 --> 00:13:16,080 Speaker 1: like a five to seven percent earnings environment. And if 233 00:13:16,080 --> 00:13:18,679 Speaker 1: there's one thing I'm certain of is the returns on 234 00:13:18,760 --> 00:13:21,240 Speaker 1: financial assets in the last decade will not be repeated 235 00:13:21,280 --> 00:13:23,640 Speaker 1: for the next decade. You got seventeen percent peranum out 236 00:13:23,679 --> 00:13:25,959 Speaker 1: of the SMP. That is not happening again. I think 237 00:13:25,960 --> 00:13:28,360 Speaker 1: you're gonna be getting something in the middle high single digits. 238 00:13:28,760 --> 00:13:32,120 Speaker 1: So are there sectors of the equity market that you 239 00:13:32,280 --> 00:13:35,000 Speaker 1: think investors should be overweight here? Given where ten plus 240 00:13:35,120 --> 00:13:37,640 Speaker 1: years in the in the cycle, and you know there's 241 00:13:37,720 --> 00:13:40,480 Speaker 1: only so much left for the FED. I really think 242 00:13:40,520 --> 00:13:43,199 Speaker 1: it comes down to single security selection. I mean, you know, 243 00:13:43,320 --> 00:13:45,559 Speaker 1: within the tech sector, we definitely like some names that 244 00:13:45,600 --> 00:13:47,720 Speaker 1: there are some names we think are really overpriced. Right 245 00:13:48,120 --> 00:13:49,360 Speaker 1: if we look at some of the kind of hotter 246 00:13:49,440 --> 00:13:51,720 Speaker 1: areas in tech SA in the small and MidCat software 247 00:13:51,760 --> 00:13:53,800 Speaker 1: and some of the cloud type companies, they've gone from 248 00:13:53,840 --> 00:13:56,280 Speaker 1: ten times sales to twenty times sales. So there's some 249 00:13:56,520 --> 00:13:58,959 Speaker 1: very high valuations in certain parts of the tech sector. 250 00:13:59,320 --> 00:14:00,559 Speaker 1: But then if you look it kind of some of 251 00:14:00,640 --> 00:14:03,600 Speaker 1: the bigger tech companies that really have intrenched franchises, they 252 00:14:03,640 --> 00:14:05,680 Speaker 1: still look pretty attractive to us. So so it's really 253 00:14:05,760 --> 00:14:07,920 Speaker 1: company by company and it all requires the bottom up 254 00:14:07,920 --> 00:14:10,760 Speaker 1: fundamental analysis. Roun Temple, thank you for joining us today 255 00:14:10,800 --> 00:14:14,719 Speaker 1: with Lazardsset Management, particularly delaying for that conversation with the 256 00:14:15,480 --> 00:14:18,760 Speaker 1: Secretary of Housing Urban Development, Mr Ben Carson. Roun Temple. 257 00:14:19,240 --> 00:14:35,600 Speaker 1: With Lazard, I want to bring in Greg Valier from 258 00:14:35,640 --> 00:14:38,320 Speaker 1: a g F Investments. He's the chief US policy strategist, 259 00:14:38,360 --> 00:14:40,920 Speaker 1: Tom and there's a lot to discuss with him. Greg, 260 00:14:41,040 --> 00:14:43,320 Speaker 1: thanks so much for joining us. Just let's start off 261 00:14:43,360 --> 00:14:45,480 Speaker 1: a little bit with China. Looks like the White House 262 00:14:45,560 --> 00:14:47,880 Speaker 1: is making another little move today. I'm just trying to 263 00:14:47,920 --> 00:14:49,760 Speaker 1: get a sense of how important it is, indicating that 264 00:14:50,320 --> 00:14:52,800 Speaker 1: it's holding off on its decision to allow certain U 265 00:14:52,960 --> 00:14:55,800 Speaker 1: S companies to do business with Huawei. I know Yahwei 266 00:14:55,920 --> 00:14:58,880 Speaker 1: is a big, big part of this discussion. How important 267 00:14:58,880 --> 00:15:01,600 Speaker 1: you view this development. I think it is important, and 268 00:15:01,720 --> 00:15:05,480 Speaker 1: I think that it reflects that within this administration there's 269 00:15:05,480 --> 00:15:09,560 Speaker 1: a growing debate over maybe looking at Plan B. I 270 00:15:09,680 --> 00:15:13,120 Speaker 1: think Plan B would be a modest deal. Maybe you 271 00:15:13,160 --> 00:15:16,560 Speaker 1: would have some accommodation of Huawei, maybe you'd have the 272 00:15:16,640 --> 00:15:19,520 Speaker 1: Chinese buying a ton of agricultural products from the US, 273 00:15:19,840 --> 00:15:22,680 Speaker 1: a few little things. There's still so many huge issues 274 00:15:23,040 --> 00:15:25,320 Speaker 1: that have not been resolved and probably won't be resolved 275 00:15:25,400 --> 00:15:29,240 Speaker 1: until but a small deal apart, you know, Plan B 276 00:15:29,920 --> 00:15:32,240 Speaker 1: I think is not out of the question. Can you 277 00:15:32,320 --> 00:15:36,680 Speaker 1: think a Plan B is possible prior to the election? Yeah, 278 00:15:36,880 --> 00:15:40,520 Speaker 1: I think it's possible this fall. I think the bigger 279 00:15:40,600 --> 00:15:43,120 Speaker 1: deal is a much much tougher call, as you know, 280 00:15:43,240 --> 00:15:45,800 Speaker 1: Golden Saxon others are saying now, maybe it won't be 281 00:15:46,240 --> 00:15:49,120 Speaker 1: until after the election, but I think there's got to 282 00:15:49,160 --> 00:15:51,880 Speaker 1: be something that I think both Trump and z Our 283 00:15:52,600 --> 00:15:55,720 Speaker 1: need to save some face. Gregg, one of your charms 284 00:15:55,840 --> 00:15:58,760 Speaker 1: is you actually get outside Washington, d C. And we 285 00:15:58,840 --> 00:16:02,920 Speaker 1: find this to be a modern miracle. Color Iowa Force. 286 00:16:03,000 --> 00:16:07,120 Speaker 1: Gail Collins had that hilarious column. Um, I'm gonna say 287 00:16:07,320 --> 00:16:09,960 Speaker 1: ten weeks ago or so in the New York Times 288 00:16:10,040 --> 00:16:13,120 Speaker 1: on Iowa. You know how many Democratic candidates would you 289 00:16:13,160 --> 00:16:15,440 Speaker 1: shake their hands before you went to bed one to 290 00:16:15,480 --> 00:16:19,600 Speaker 1: give a night We forget that President Obama won Iowa 291 00:16:20,480 --> 00:16:24,360 Speaker 1: by almost six percentage points a long time ago. How 292 00:16:24,520 --> 00:16:28,080 Speaker 1: republican is Iowa? Well it, first of all, if I 293 00:16:28,200 --> 00:16:31,960 Speaker 1: highly recommend getting outside of the belt Way, and I've 294 00:16:32,000 --> 00:16:34,960 Speaker 1: been in I've been, like my wife, I've been in 295 00:16:35,040 --> 00:16:38,040 Speaker 1: the midwest of it this summer, and it really is striking. 296 00:16:38,160 --> 00:16:41,960 Speaker 1: Nobody cares about impeachment. People do say though they're sick 297 00:16:42,000 --> 00:16:44,600 Speaker 1: of the Trump tweets. I think that's a real vulnerability 298 00:16:45,240 --> 00:16:48,320 Speaker 1: for him. But you mentioned purple states, and Iowa is 299 00:16:48,320 --> 00:16:52,320 Speaker 1: a classic example. Uh. It voted for Trump two years ago. 300 00:16:52,840 --> 00:16:55,800 Speaker 1: This year, you've got a recession, if not a depression 301 00:16:56,120 --> 00:16:58,800 Speaker 1: in the farm belt that hurts Trump. Well, let's call 302 00:16:58,840 --> 00:17:02,120 Speaker 1: her that. What's the economic measure, the vli A meter 303 00:17:02,720 --> 00:17:05,919 Speaker 1: on the American farmer? I mean, forget this sterea, the gloom, 304 00:17:05,960 --> 00:17:09,800 Speaker 1: the banner headlines on cable TV. What's the actual story 305 00:17:10,240 --> 00:17:13,840 Speaker 1: that you observe among the American farmer in a word, 306 00:17:13,920 --> 00:17:17,080 Speaker 1: time uncertainty. The farmers don't know if China will be 307 00:17:17,200 --> 00:17:20,240 Speaker 1: in buying agricultural products, they don't know how much more 308 00:17:20,280 --> 00:17:24,160 Speaker 1: they'll get from subsidies. And also in the Midwest, companies 309 00:17:24,440 --> 00:17:28,360 Speaker 1: that rely on component parts from China are also uncertain. 310 00:17:28,440 --> 00:17:31,199 Speaker 1: They can't make long term plans because these parts are 311 00:17:31,240 --> 00:17:35,520 Speaker 1: getting scarce and more expensive. So throughout the Midwest, seemingly 312 00:17:35,600 --> 00:17:40,439 Speaker 1: a stronghold for Trump, you're seeing far more uncertainty. It's interesting. 313 00:17:40,440 --> 00:17:43,000 Speaker 1: Great you paint a picture there that that clearly suggests 314 00:17:43,000 --> 00:17:45,800 Speaker 1: that President Trump really needs to get a deal done. 315 00:17:46,119 --> 00:17:48,480 Speaker 1: Yet I'm not so sure about President g What is 316 00:17:48,520 --> 00:17:52,040 Speaker 1: your sense there about his need to get a deal done, 317 00:17:52,119 --> 00:17:54,560 Speaker 1: any deal done, rather than, you know, wait a couple 318 00:17:54,560 --> 00:17:57,880 Speaker 1: of years. If there's been a miscalculation, I think it's 319 00:17:57,960 --> 00:18:02,199 Speaker 1: the US miscalculating how uh strident that Chinese are going 320 00:18:02,280 --> 00:18:04,959 Speaker 1: to be. They'll they'll withstand this. I think that they 321 00:18:04,960 --> 00:18:07,440 Speaker 1: are not in a big hurry. They feel if they wait, 322 00:18:07,520 --> 00:18:10,760 Speaker 1: they might get a new president. Greg And on our view. 323 00:18:10,800 --> 00:18:14,600 Speaker 1: I'm going to put out inflation adjusted log SOB soybeans. 324 00:18:15,040 --> 00:18:17,400 Speaker 1: You can only do that on the Bloomberg as well. 325 00:18:17,520 --> 00:18:21,200 Speaker 1: I mean, farm prices really matter. Did you go to 326 00:18:21,280 --> 00:18:23,080 Speaker 1: an election, don't they? I mean in terms of the 327 00:18:23,160 --> 00:18:26,520 Speaker 1: states that matter of how we choose the next president. 328 00:18:27,600 --> 00:18:30,560 Speaker 1: Is it a price depression that you observe in corn 329 00:18:31,040 --> 00:18:33,840 Speaker 1: and soybeans and the other grains, Well, you see that. 330 00:18:34,040 --> 00:18:36,400 Speaker 1: But I would argue the three states that really will 331 00:18:36,560 --> 00:18:41,240 Speaker 1: determine the next election or Pennsylvania, Michigan, and Wisconsin, and 332 00:18:41,359 --> 00:18:44,520 Speaker 1: in those places I've been there recently. You hear people 333 00:18:44,600 --> 00:18:47,760 Speaker 1: talk a little bit, believe it or not, Tom about inflation, 334 00:18:48,200 --> 00:18:51,600 Speaker 1: about a very tight labor market having to pay more money, 335 00:18:51,920 --> 00:18:56,080 Speaker 1: about more expensive component parts. So I'm not a believer 336 00:18:56,240 --> 00:18:58,840 Speaker 1: that inflation is dead. In fact, when everyone in the 337 00:18:58,880 --> 00:19:01,840 Speaker 1: world says in ation is dead, I get worried when 338 00:19:01,880 --> 00:19:05,639 Speaker 1: you see a consensus that's that unanimous. Chairman Paul agrees 339 00:19:05,680 --> 00:19:09,600 Speaker 1: with Greg Valier because he keeps bringing up trimmed Dallas CPI, 340 00:19:09,720 --> 00:19:12,440 Speaker 1: which is a little more lofty, a little more service 341 00:19:12,520 --> 00:19:16,120 Speaker 1: sect lofty. Mr Valier, thank you so much for congratulations 342 00:19:16,200 --> 00:19:18,520 Speaker 1: on a note that went on the edge of viral 343 00:19:18,640 --> 00:19:36,119 Speaker 1: this week I'm planning b is. It's called Paul on 344 00:19:36,200 --> 00:19:38,760 Speaker 1: the equity markets now. It has been a joy to 345 00:19:38,800 --> 00:19:43,639 Speaker 1: speak to. Alicia Levine brings a prodigious quantitative ability uh 346 00:19:43,840 --> 00:19:46,920 Speaker 1: to the looking of equities. I want to go really 347 00:19:47,000 --> 00:19:50,480 Speaker 1: really retail right now, Alicia, which is I'm on the 348 00:19:50,640 --> 00:19:53,679 Speaker 1: brand of this weekend. I've got the beverage of my choice. 349 00:19:54,240 --> 00:19:58,440 Speaker 1: And there's a little bit of familial tension. Somebody was like, 350 00:19:58,680 --> 00:20:02,000 Speaker 1: let's stay in the market. Somebody said, we're not getting 351 00:20:02,040 --> 00:20:06,080 Speaker 1: back in in January. They missed this big move. Now 352 00:20:06,200 --> 00:20:11,240 Speaker 1: what for those people that have not enjoyed December to 353 00:20:11,359 --> 00:20:14,040 Speaker 1: the beginning of August? What do they do? And there 354 00:20:14,119 --> 00:20:16,840 Speaker 1: are many people who did not enjoy There's a lot 355 00:20:16,880 --> 00:20:20,160 Speaker 1: of people out there who didn't enjoy December. They missed 356 00:20:20,200 --> 00:20:24,160 Speaker 1: the alpha, they missed it. I think here it's okay 357 00:20:24,480 --> 00:20:28,000 Speaker 1: to wait. That means there's a probably a better entry point, 358 00:20:28,119 --> 00:20:30,679 Speaker 1: but it doesn't mean that the game is over right now. 359 00:20:30,800 --> 00:20:33,040 Speaker 1: This is not the beginning of the end. But there 360 00:20:33,240 --> 00:20:39,560 Speaker 1: is more uncertainty and more unpleasant headlines. I suspect coming 361 00:20:39,840 --> 00:20:43,840 Speaker 1: around that September one to the FED meeting September eighteen. 362 00:20:43,920 --> 00:20:45,359 Speaker 1: You're gonna have like a week or two and a 363 00:20:45,400 --> 00:20:49,920 Speaker 1: half weeks in early September where unfortunately the headlines could 364 00:20:50,000 --> 00:20:51,920 Speaker 1: hit the market, and then there are certain places where 365 00:20:51,920 --> 00:20:54,560 Speaker 1: you'd expect the market to fall. All right, so that 366 00:20:55,160 --> 00:20:58,320 Speaker 1: the big issue for the market's clearly is trade, and 367 00:20:58,520 --> 00:21:00,680 Speaker 1: we get another little tit for tat seems like every 368 00:21:00,720 --> 00:21:03,680 Speaker 1: single day, whether how you set the redman me or 369 00:21:04,040 --> 00:21:06,680 Speaker 1: whether Huawei comes like it is today. How do you 370 00:21:06,800 --> 00:21:08,920 Speaker 1: kind of put that into your model. I'm sure there's 371 00:21:08,920 --> 00:21:11,320 Speaker 1: not an input column in your spreadsheet for trade, So 372 00:21:11,520 --> 00:21:14,040 Speaker 1: how do you kind of put that into your outlook? 373 00:21:14,800 --> 00:21:16,920 Speaker 1: It's a it's a great question because in many ways 374 00:21:16,960 --> 00:21:19,560 Speaker 1: it's very hard to gain all of this out. So 375 00:21:19,800 --> 00:21:22,879 Speaker 1: I'll say this, I think that the steadying ability of 376 00:21:23,080 --> 00:21:26,840 Speaker 1: trade is less. You don't need as much positive outcome 377 00:21:26,880 --> 00:21:29,800 Speaker 1: on trade to study the market. That is, you could 378 00:21:29,840 --> 00:21:32,200 Speaker 1: have the president say we're going to hold off on 379 00:21:32,280 --> 00:21:34,840 Speaker 1: that ten percent, but we're keeping the other tariffs and 380 00:21:34,840 --> 00:21:36,880 Speaker 1: we're gonna keep on negotiating. We don't know how long 381 00:21:36,960 --> 00:21:38,639 Speaker 1: this is going to go. But if you get it, 382 00:21:39,920 --> 00:21:43,520 Speaker 1: you haven't heard that yet. Look, Look, it's it's it's 383 00:21:43,640 --> 00:21:48,320 Speaker 1: clear that the administration has stepped over a red line 384 00:21:48,920 --> 00:21:51,320 Speaker 1: and that the economy is biting back. Right, So the 385 00:21:51,359 --> 00:21:55,640 Speaker 1: economy was strong enough and resilient enough to take all 386 00:21:55,760 --> 00:21:58,280 Speaker 1: the headlines and all the actions and the tariffs up 387 00:21:58,320 --> 00:22:00,640 Speaker 1: to this point. And when you only you have Peter 388 00:22:00,760 --> 00:22:04,159 Speaker 1: Navarro saying this is a great idea. I think it's 389 00:22:04,200 --> 00:22:06,440 Speaker 1: a signal. And the bond market is telling the administration 390 00:22:06,520 --> 00:22:08,879 Speaker 1: and the equity market saying you've now gone to Certainly 391 00:22:08,880 --> 00:22:10,920 Speaker 1: the markets are speaking. There's a question, and that doesn't 392 00:22:10,920 --> 00:22:13,399 Speaker 1: even go to the adjustment of the dot plot with 393 00:22:13,480 --> 00:22:16,960 Speaker 1: our central banquet, we see it. Another question for the weekend. 394 00:22:17,640 --> 00:22:20,720 Speaker 1: I got lucky, I have some duration. I have a 395 00:22:20,840 --> 00:22:25,520 Speaker 1: coupon price up. I'd lovely known from Gary Schilling, who's 396 00:22:25,560 --> 00:22:28,119 Speaker 1: the call of a generation on low? What do you 397 00:22:28,280 --> 00:22:31,359 Speaker 1: do when you get a double digit gain and fixed income? 398 00:22:31,440 --> 00:22:33,680 Speaker 1: Do you just go to cash and check? What do 399 00:22:33,760 --> 00:22:37,159 Speaker 1: you actually physically do it? B n y Melon when 400 00:22:37,200 --> 00:22:40,280 Speaker 1: you got double digit pop? We had this great conversation 401 00:22:40,720 --> 00:22:44,000 Speaker 1: yesterday about what do you do with with fixed income? 402 00:22:44,119 --> 00:22:49,159 Speaker 1: Right now? Tactically, it's reasonable to assume you hit the 403 00:22:49,200 --> 00:22:51,960 Speaker 1: two thousand and sixteen lows on yields, right, So you 404 00:22:52,080 --> 00:22:55,320 Speaker 1: probably get another rally here out of that. Having said that, 405 00:22:56,040 --> 00:22:59,080 Speaker 1: you've you know, you've made your money this year, and 406 00:22:59,280 --> 00:23:02,080 Speaker 1: I suspect that we're going that the trade is going 407 00:23:02,119 --> 00:23:04,920 Speaker 1: to be in the opposite direction, and I would you know, 408 00:23:05,000 --> 00:23:08,080 Speaker 1: I could see going into investment grade credit here from 409 00:23:08,200 --> 00:23:11,200 Speaker 1: Sovereign Day for all of you worldwide and coast to coast, 410 00:23:11,280 --> 00:23:14,720 Speaker 1: we're having a west coast east coast New York weekend. 411 00:23:14,760 --> 00:23:16,879 Speaker 1: We're going far west in New Jersey. We're gonna do 412 00:23:16,960 --> 00:23:19,800 Speaker 1: the golf tournament, the Northern Trust Tournament a bit, and 413 00:23:19,880 --> 00:23:22,560 Speaker 1: then we go far east. Alicia, I believe you will 414 00:23:22,720 --> 00:23:26,440 Speaker 1: try to get to the Hamptons this weekend, admits to president, 415 00:23:26,640 --> 00:23:30,160 Speaker 1: to presidential fundraisers as well. How do you turn left 416 00:23:30,240 --> 00:23:34,960 Speaker 1: in the Hamptons this weekend? You go late late? What 417 00:23:35,840 --> 00:23:38,639 Speaker 1: you work all day Friday? And you go late because 418 00:23:38,720 --> 00:23:42,040 Speaker 1: nobody goes late on Friday. You work all day? Yeah, 419 00:23:42,119 --> 00:23:44,359 Speaker 1: you go late on the what do you do Sunday night? 420 00:23:44,440 --> 00:23:46,280 Speaker 1: I can't come home because I got you know, I 421 00:23:46,359 --> 00:23:48,919 Speaker 1: got the I gotta take. Well, if I have the Sikorski, 422 00:23:49,000 --> 00:23:51,760 Speaker 1: I can do it. Pharaoh has it right now. But 423 00:23:52,040 --> 00:23:53,560 Speaker 1: if I have the helicopter, I'm okay. What do you 424 00:23:53,640 --> 00:23:57,439 Speaker 1: do on Friday Sunday coming home after a presidential weekend 425 00:23:57,480 --> 00:23:59,840 Speaker 1: in the Hampton's. You never take twenty seven and you 426 00:24:00,000 --> 00:24:03,600 Speaker 1: take only side roads there. It is the information you 427 00:24:03,760 --> 00:24:07,000 Speaker 1: need your traffic report. Alicia, Lamina b and Y Melon 428 00:24:07,560 --> 00:24:10,800 Speaker 1: this weekend on the side roads of the Hampton's. I 429 00:24:10,920 --> 00:24:14,359 Speaker 1: got so lost one and the fun and the fog. 430 00:24:14,520 --> 00:24:17,480 Speaker 1: Was it like Mr Connecticut, you know the fig the 431 00:24:17,640 --> 00:24:22,200 Speaker 1: side I was like ours, Paul lost the side roads, 432 00:24:22,320 --> 00:24:25,800 Speaker 1: as they called just stay hometown is staycation. Thanks for 433 00:24:25,960 --> 00:24:30,320 Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to 434 00:24:30,520 --> 00:24:36,200 Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 435 00:24:36,800 --> 00:24:40,080 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 436 00:24:40,160 --> 00:24:43,520 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.