WEBVTT - Who's on the Short List for Fed Chair? 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Bramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:32.040 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Right now, 0:00:32.120 --> 0:00:34.400 I want to talk about the big debate that's reaching 0:00:34.479 --> 0:00:38.080 in bond markets. Are we on the precipice of much 0:00:38.159 --> 0:00:42.360 higher yields in the US bond market much lower values? 0:00:42.560 --> 0:00:46.200 Aren't we going to see this bond route develop and deepen? 0:00:46.320 --> 0:00:48.320 And to answer this, I want to bring in Chuck Lieberman, 0:00:48.400 --> 0:00:52.800 chief investment officer and founding member and Advisor's Advisor's Capital 0:00:52.840 --> 0:00:56.760 Management LLC. He's also a Bloomberg profit He writes for UH. 0:00:56.880 --> 0:01:00.840 The website Bloomberg View maintains Chuck. Thank you so much 0:01:00.880 --> 0:01:04.440 for joining us. Right now, I'm looking at longer dated 0:01:04.640 --> 0:01:07.800 treasuries that have lost more than three percent over the 0:01:07.800 --> 0:01:10.800 past month. Do you think that this sell off is 0:01:10.840 --> 0:01:15.000 going to deepen? A sure? Do? Um. The economy is 0:01:15.000 --> 0:01:19.240 doing pretty well, the labor market is tight. Um every 0:01:19.240 --> 0:01:22.480 measure we have on the labor market indicates that we've 0:01:22.520 --> 0:01:24.760 got a progressive tightening of the labor market to a 0:01:24.840 --> 0:01:30.200 level that is tight historically. Um, it looks like the 0:01:30.240 --> 0:01:33.679 Phillips curve has flattened, which means that we're not paying 0:01:33.800 --> 0:01:37.360 for that decline in the unemployment rate yet with higher 0:01:37.440 --> 0:01:41.160 labor costs, at least significantly higher labor costs. But ultimately 0:01:41.160 --> 0:01:44.120 I think we will, and so it's imperative that the 0:01:44.160 --> 0:01:47.200 Fed get interest rates at least back to a neutral level. 0:01:48.040 --> 0:01:49.800 Chuck Liberman, I wonder if you could just step back 0:01:49.840 --> 0:01:52.960 for a second and maybe just opine on the idea 0:01:52.960 --> 0:01:55.680 that you need to separate all the bad news that 0:01:55.920 --> 0:01:59.920 is a constant torrent from all of the information necessary 0:02:00.080 --> 0:02:04.880 to make decent investment decisions. Sure, well, it really comes 0:02:04.920 --> 0:02:08.480 down to what determines the value of equities UH and 0:02:08.639 --> 0:02:14.840 fixed income UM and UH. Theoretically, equity valuations are discounted 0:02:14.919 --> 0:02:18.640 values of future expected earnings. Notice, I haven't said anything 0:02:18.639 --> 0:02:21.720 about politics yet, I haven't said anything about climate. I 0:02:21.720 --> 0:02:24.040 haven't said anything about a lot of other issues. Correct, 0:02:24.080 --> 0:02:27.920 you're trying to keep it straightforward and simple, right, And UH, 0:02:28.200 --> 0:02:30.799 that's really the issue when you look back in the 0:02:30.880 --> 0:02:33.480 last thirty years, there have been lots of awful things 0:02:33.480 --> 0:02:36.440 that have happened, and yet the equity market is at 0:02:36.480 --> 0:02:40.760 all time high. How come it's because the companies have grown, 0:02:40.960 --> 0:02:45.119 profits have grown, the companies are worth more, and cumulatively 0:02:45.400 --> 0:02:47.679 that means the market is worth more and at a 0:02:47.720 --> 0:02:50.720 record high. Chuck, why is now different? I mean people 0:02:50.760 --> 0:02:52.840 have been saying that the economy has been looking better 0:02:52.880 --> 0:02:56.720 steadily over the past few years. People have been expecting 0:02:56.800 --> 0:03:00.160 higher yields for a long time. Now you have an 0:03:00.160 --> 0:03:03.000 economy globally that's a wash with central bank cash. The 0:03:03.040 --> 0:03:05.799 Bank of Japan and the European central banks are still 0:03:06.000 --> 0:03:09.560 printing money. What's going to make the situation turned so 0:03:09.680 --> 0:03:13.080 dramatically in the US? Well, I don't know that anything 0:03:13.120 --> 0:03:15.840 has to change dramatically at all. I think we're on 0:03:15.880 --> 0:03:22.120 a trajectory of pretty stable, almost systematic growth. Uh And 0:03:22.200 --> 0:03:24.840 that growth rate, while lower than in the past, is 0:03:24.880 --> 0:03:28.600 nonetheless more than fast enough to drive unemployment down. And 0:03:28.680 --> 0:03:31.480 so we've pushed the unemployment rate to a level at 0:03:31.520 --> 0:03:35.360 which it becomes a problem for labor costs. When you 0:03:35.600 --> 0:03:38.480 survey firms or look at how firms feel about the 0:03:38.520 --> 0:03:42.000 labor market. They're very, very consistent in reporting that it's 0:03:42.000 --> 0:03:44.240 difficult for them to find the workers they need. Right. 0:03:44.400 --> 0:03:47.120 But but all of this is sort of sort of 0:03:47.120 --> 0:03:50.120 flies in the phase of the idea that with such 0:03:50.400 --> 0:03:53.720 high valuations and stock markets, you have investors saying, look, 0:03:53.920 --> 0:03:56.119 the second that the ten year treasury gets to three 0:03:56.160 --> 0:03:59.240 percent yields two point eight percent yields, I'm buying because 0:03:59.240 --> 0:04:01.560 you can't get that kind of reliable yield anywhere. I mean, 0:04:01.600 --> 0:04:04.880 in other words, fundamentals don't make sense at this point. Well, 0:04:04.920 --> 0:04:07.480 I would say that the stocks would even be attractive 0:04:07.520 --> 0:04:10.480 if if thirty year treasuries or ten year treasuries for 0:04:10.520 --> 0:04:15.320 that matter, we're three percent. When you can buy US equities, 0:04:15.440 --> 0:04:19.480 quality equities that have dividend yields up close to three percent, 0:04:20.720 --> 0:04:24.720 you really don't should not have interest rates as low 0:04:24.760 --> 0:04:28.479 as they are. Uh. Stocks are clearly going to continue 0:04:28.520 --> 0:04:31.680 to grow over the next decade and at a decent rate. Uh. 0:04:31.680 --> 0:04:34.719 And you're getting that yield on many of those high 0:04:34.800 --> 0:04:38.520 quality companies. Uh. Something is wrong. Stocks are miss price 0:04:38.640 --> 0:04:42.960 compared to bonds, and I'll entertain a number of possibilities. 0:04:43.000 --> 0:04:47.640 Bonds are badly overvalued. I would accept that proposition stocks 0:04:47.640 --> 0:04:52.000 are somewhat undervalued. I am tempted to accept that proposition 0:04:52.080 --> 0:04:55.320 because when I do dividend discount models, the interest rates 0:04:55.360 --> 0:04:59.200 that prevail in the market today imply much higher valuations. 0:04:59.800 --> 0:05:03.840 We typically ignore those valuations because people would be embarrassed 0:05:03.839 --> 0:05:06.680 to suggest that the stock market is undervalued. And yet 0:05:06.800 --> 0:05:10.120 if you look at interest rates compared to bonds, stocks 0:05:10.160 --> 0:05:13.200 are cheap. So you can have it anyway which way 0:05:13.240 --> 0:05:16.800 you want. Bonds are expensive, stocks are cheap, or some 0:05:16.880 --> 0:05:19.880 combination of the two. Well, Chuck, let's say that you 0:05:20.000 --> 0:05:22.760 adhere to the idea that it is a market of 0:05:22.839 --> 0:05:26.440 stocks and not a stock market. What stocks or what 0:05:26.560 --> 0:05:30.920 kinds of companies should you be invested in? Well, it, 0:05:31.320 --> 0:05:34.640 I think we still reflect the trauma of two thousand 0:05:34.720 --> 0:05:37.760 and eight. So the stocks that tend to be most 0:05:37.839 --> 0:05:42.679 expensive are the ones that are typically considered safe or safer, 0:05:43.120 --> 0:05:45.200 and the ones that are cheapest are the ones that 0:05:45.240 --> 0:05:48.960 are traditionally considered riskier. So among the ones that I 0:05:49.040 --> 0:05:54.200 considered cheap or the financials, the banks are very cheap 0:05:54.240 --> 0:05:57.640 in my mind. Uh, energy, when you hold on when 0:05:57.640 --> 0:05:59.760 you say banks are, you're talking about big money center 0:05:59.800 --> 0:06:04.240 bank like JP Morgan Bank of America, as well as 0:06:04.240 --> 0:06:07.880 Stanley City Group, City Group absolutely all of the above, um. 0:06:08.200 --> 0:06:11.200 And then the regional banks were also pretty attractive. They're 0:06:11.200 --> 0:06:14.080 not quite as cheap as the money center banks, maybe 0:06:14.160 --> 0:06:16.600 because people were burned more in the money centers than 0:06:16.640 --> 0:06:20.040 they were in the regionals. But I consider the regional's 0:06:20.080 --> 0:06:24.000 attractive as well. UM. That's on the financial in the 0:06:24.000 --> 0:06:28.280 financial sector, and then in uh energy, I consider the 0:06:28.279 --> 0:06:32.640 pipelines very very cheap. UH. People got burned because of 0:06:32.680 --> 0:06:35.599 the drop in oil prices, but you know, we're produced. 0:06:35.640 --> 0:06:39.080 We're almost back to the record high production levels for 0:06:39.160 --> 0:06:43.160 crude oil in the United States. The pipelines are caring more. UH. 0:06:43.200 --> 0:06:46.800 The expectation is we're going to increase production going forward. 0:06:47.480 --> 0:06:52.640 Fracking is becoming progressively more efficient, lower costs. Um, we're 0:06:52.640 --> 0:06:55.080 going to consume more of this product. Somebody's got to 0:06:55.160 --> 0:06:58.040 carry it, and yet the stocks are cheap. Well, So 0:06:58.080 --> 0:07:00.120 here's what I'm struggling with. A lot of people have 0:07:00.200 --> 0:07:03.839 said that the loose credit conditions has enabled the stock 0:07:03.880 --> 0:07:07.640 market rise. And if you start to see tenure treasuries 0:07:07.920 --> 0:07:13.680 at thirty year thirty three yields and above, that's going 0:07:13.720 --> 0:07:16.360 to increase the borrowing costs of a lot of companies. 0:07:16.440 --> 0:07:20.760 Won't that hit the stock market? Uh, it will to 0:07:20.960 --> 0:07:24.480 some degree because stocks are not independent the bonds the 0:07:24.520 --> 0:07:27.360 tour are integrated, and so if interest rates rise in 0:07:27.440 --> 0:07:30.880 the in the bond market, bonds will provide more competition 0:07:30.960 --> 0:07:33.840 for stocks. But I don't think the stock market is 0:07:33.880 --> 0:07:37.320 priced at a level that reflects prevailing interest rates. So 0:07:37.360 --> 0:07:41.680 I think the stock market can handle rising rates surprisingly 0:07:41.800 --> 0:07:45.720 well unless those rates shoot up a lot more. Thank 0:07:45.760 --> 0:07:48.000 you so much for joining us. It's truly a pleasure 0:07:48.000 --> 0:07:50.600 to speak with you. Chuck Lieberman, chief investment officer and 0:07:50.640 --> 0:07:54.679 founding member and Advisor's Capital Management, also a Bloomberg profit 0:07:54.720 --> 0:08:11.840 who writes for our Bloomberg View website, Carl always a pleasure. Um. 0:08:11.880 --> 0:08:14.920 I noticed that there's a story about the final list, 0:08:14.960 --> 0:08:17.200 the short list. It has people such as X board 0:08:17.240 --> 0:08:22.600 member Kevin Walsh, Jerome Powell, who is a current Fed governor. 0:08:23.360 --> 0:08:25.520 Tell us who you think is at least in the 0:08:25.640 --> 0:08:28.400 running and maybe just throwing some wild cards for us 0:08:28.400 --> 0:08:31.920 to kind of understand. Maybe the president's thinking. Sure, absolutely, 0:08:32.000 --> 0:08:36.439 so the shortlist is getting shorter, as as being leaked 0:08:36.440 --> 0:08:39.000 to the press and whatnot. Uh, So we know that 0:08:39.240 --> 0:08:41.800 we are zeroing in on a decision on a reduced 0:08:41.880 --> 0:08:44.560 number of candidates, and that decision could be coming in 0:08:44.559 --> 0:08:49.319 the next two to three weeks, maybe sooner. I think that, uh, 0:08:49.640 --> 0:08:53.160 you know, there's a litmus test being applied to the candidates. 0:08:53.200 --> 0:08:57.160 And so Donald Trump has said, how he's a low 0:08:57.200 --> 0:08:59.439 interest rate guy, and he wants a low interest rate 0:08:59.480 --> 0:09:02.160 FED chair. Uh and that's all. Find it nice. And 0:09:02.200 --> 0:09:06.200 I think that is an important prerequisite which does disqualify 0:09:06.360 --> 0:09:09.760 folks like John Taylor, because pretty much every iteration of 0:09:09.800 --> 0:09:12.600 the Taylor rule that you look at would point to 0:09:12.920 --> 0:09:15.520 higher interest rates and where they currently stand. So I 0:09:15.559 --> 0:09:18.080 think that the Hawks are being crossed off the list. 0:09:18.559 --> 0:09:20.800 And the other part of that litmus test is that 0:09:21.160 --> 0:09:24.720 he basically wants to be sure that whoever's FED chair 0:09:25.120 --> 0:09:26.960 is not going to stand in the way of his 0:09:27.080 --> 0:09:31.240 economic agenda. And more specifically, that means if he is 0:09:31.320 --> 0:09:35.480 passing tax reform, which could maybe not be so comprehensive 0:09:35.840 --> 0:09:38.320 in terms of tax reform, but more of a a 0:09:38.400 --> 0:09:42.199 sugar high from a tax cut that may not necessarily 0:09:42.240 --> 0:09:45.200 be revenue neutral, at least in the short term. He 0:09:45.240 --> 0:09:47.120 does not want a FED Chair to step in front 0:09:47.160 --> 0:09:49.720 of that economic benefit. So if you're going to raise 0:09:49.840 --> 0:09:53.000 rates as the president cuts taxes, you're probably not going 0:09:53.080 --> 0:09:55.920 to be in the FED chair seat next year. All 0:09:56.000 --> 0:09:58.920 this makes me question why Kevin Walsh is even in 0:09:58.960 --> 0:10:03.959 the running. Well, the uh the Worsh family has some 0:10:04.000 --> 0:10:09.080 connections to the president. Uh and he is well liked 0:10:09.120 --> 0:10:13.800 among Republicans and conservatives, but uhh and he certainly is 0:10:14.000 --> 0:10:15.800 a bit of a maverick, even though he was a 0:10:15.840 --> 0:10:19.000 former governor. He's been highly critical of the Fed. Uh 0:10:19.080 --> 0:10:21.960 So in those regards, I think he does appeal to 0:10:22.040 --> 0:10:26.760 the President's sentiments and instincts. However, he was very dismissive 0:10:26.800 --> 0:10:30.000 of the Fed missing on the inflation target earlier this 0:10:30.080 --> 0:10:33.240 year in an interview with Mike McKee. Actually uh and 0:10:33.559 --> 0:10:36.800 also he's concerned about financial stability risks, so he is 0:10:36.840 --> 0:10:40.000 someone who also wants rates to be higher. Uh and 0:10:40.040 --> 0:10:43.920 that again is not consistent with Trump's economic agenda. So 0:10:44.000 --> 0:10:48.360 Bloomberg's shortlist that we've put out includes Kevin Walsh, also 0:10:48.440 --> 0:10:51.760 Jenny Yellen, who is the current FED Chair, Also Jerome 0:10:52.000 --> 0:10:55.640 Power Powell, who is a current FED governor. Um Neil 0:10:55.720 --> 0:11:00.360 kesh Kari has gotten less attention, and yet Jeffrey Unlock, 0:11:00.440 --> 0:11:02.840 the head of Double Line, came out and said that 0:11:02.920 --> 0:11:06.520 he expects Kashkari to be the likely next FED chair. 0:11:06.600 --> 0:11:09.960 Is he wrong? Well, we'll find out soon enough. I 0:11:10.000 --> 0:11:13.160 think he is potentially on the short list, and he's 0:11:13.360 --> 0:11:16.480 definitely the dark horse candidate does a bit of an outsider, 0:11:16.800 --> 0:11:20.960 somewhat critical of the FED, UH and certainly dissenting at 0:11:21.480 --> 0:11:26.959 several meetings over critical exact opposite standpoint than Marsh saying 0:11:27.000 --> 0:11:29.840 that it's moving too quickly. Absolutely, so he's a low 0:11:29.960 --> 0:11:32.920 rates guy, and he's saying until we see inflation hitting 0:11:32.960 --> 0:11:36.160 the FEDS target, we should stop raising rates. UH. That 0:11:36.360 --> 0:11:39.120 is music to the ears of the president. I wonder 0:11:39.200 --> 0:11:43.240 called does this highlight the contradiction that seems to follow 0:11:43.679 --> 0:11:47.679 President Donald Trump, which is that his previous statements and 0:11:47.800 --> 0:11:53.480 many of his previous positions seem more liberal and more 0:11:53.800 --> 0:11:57.520 a dovish in general, whether it is interest rates, whether 0:11:57.559 --> 0:12:02.679 it is social policy, many topics. That is a divergence 0:12:02.760 --> 0:12:07.000 to the Republican Party which he now leads, is that 0:12:07.120 --> 0:12:10.480 the facto president, he leads the party, but he is 0:12:10.520 --> 0:12:14.000 by no means a conventional Republican and so as he's 0:12:14.040 --> 0:12:17.680 looking at FED chairs, that absolutely is the case as well. 0:12:18.000 --> 0:12:22.840 Don't forget the President Obama chose Janet Yellen for the job. Um, 0:12:22.920 --> 0:12:26.559 so he is not conventional I think a conventional Republican. 0:12:26.840 --> 0:12:30.240 If it were Pence picking the FED chair, I think 0:12:30.280 --> 0:12:33.160 Walsh would be very high up on the list. But 0:12:33.679 --> 0:12:38.000 because of this focus on really labor economics, right seeing 0:12:38.040 --> 0:12:40.840 if you can push that unemployment rate down and improving 0:12:40.920 --> 0:12:44.360 the the status of the middle class and the working class, 0:12:44.400 --> 0:12:48.200 those are democratic initiatives traditionally, uh, and that is a 0:12:48.240 --> 0:12:50.800 priority of this president. And don't forget it's a lot 0:12:50.840 --> 0:12:54.640 of Reagan Democrats that crossed over and voted for him 0:12:54.679 --> 0:12:58.960 in those industrial Midwestern states, uh, that he's looking to 0:12:59.400 --> 0:13:03.360 help out. Although President Trump himself isn't going through pages 0:13:03.400 --> 0:13:06.640 of economists and trying to pinpoint the perfect FED chair, 0:13:06.760 --> 0:13:10.360 So he is surrounded by some more traditional Republicans. Who 0:13:10.360 --> 0:13:12.960 are his advisors on this? Who are they and how 0:13:13.040 --> 0:13:16.480 much power do they have in selecting the next FED chair? Well, 0:13:16.520 --> 0:13:20.240 I think Minuchin and Cone have both been influential in 0:13:20.280 --> 0:13:23.800 this regard. I think that cons chances because he was 0:13:23.880 --> 0:13:28.360 originally considered to be on the shortlist diminished after the Charlottesville, 0:13:28.600 --> 0:13:33.040 Virginia violence and the you know, the president wants uh 0:13:33.280 --> 0:13:36.040 loyalty in that FED candidates, so he wants a low 0:13:36.040 --> 0:13:39.200 interest rates person. He also wants a loyal person, uh, 0:13:39.240 --> 0:13:41.439 and I think those are the priorities. So the committee 0:13:41.480 --> 0:13:44.240 shapes to some degree, but the final say will absolutely 0:13:44.360 --> 0:13:47.000 be his and arguably this will be one of the 0:13:47.160 --> 0:13:51.200 key moments for a FED chair to really dictate the 0:13:51.200 --> 0:13:54.959 direction of policy going forward, considering that the FED is 0:13:55.000 --> 0:13:58.640 about to start unwinding its balance sheet and conceivably they 0:13:58.679 --> 0:14:01.560 could speed that process up for low it down. Carl Orgadana, 0:14:01.600 --> 0:14:04.240 thank you so much for joining us. As always, Cargadona's 0:14:04.280 --> 0:14:19.040 chief US economist for Bloomberg Intelligence. Return our attention now 0:14:19.120 --> 0:14:24.920 to Argentina. Argentina's benchmark stock index, the Marvel, down about 0:14:25.040 --> 0:14:28.960 one point three percent today, and that concludes a winning 0:14:28.960 --> 0:14:34.720 streak of thirteen consecutive sessions where the stock market moved 0:14:34.840 --> 0:14:38.480 higher and the polls a show that there are is 0:14:38.520 --> 0:14:43.400 a friendly attitude towards Mauricio Macri. The government is likely 0:14:43.520 --> 0:14:48.120 to maintain its position in the October legislative decisions, and 0:14:48.160 --> 0:14:51.880 the Marvel index is up fifty eight percent year to date. 0:14:52.240 --> 0:14:55.240 Here to tell us more about Argentina is our own 0:14:55.360 --> 0:14:58.280 editor in chief emeritus for Bloomberg News, Matt Winkler. Thank 0:14:58.320 --> 0:15:02.480 you for coming in. What does Asians has mockery made 0:15:02.920 --> 0:15:07.440 that would encourage investors? Thank you, pim pleasure to be 0:15:07.520 --> 0:15:10.320 with you. You know, there are two things that he 0:15:10.440 --> 0:15:14.120 had to address immediately and he promised to. One was 0:15:15.040 --> 0:15:18.880 runaway cost of living otherwise known as inflation, and the 0:15:18.920 --> 0:15:21.760 other was the peril of default, the kind of yin 0:15:21.840 --> 0:15:27.240 and yang of modern times for people living in Argentina 0:15:27.480 --> 0:15:32.840 and uh not as you would expect UM anything close 0:15:32.880 --> 0:15:36.560 to a developed economy. And so far, so good. He's 0:15:36.680 --> 0:15:41.600 almost two years into his presidency and the inflation rate 0:15:41.680 --> 0:15:47.280 is collapsed. It's down from a hive about to twenty 0:15:47.320 --> 0:15:49.920 And if you look at the Bloomberg and look at 0:15:50.000 --> 0:15:54.160 what economists anticipate over the next year, it's gonna get 0:15:54.240 --> 0:15:58.800 to eleven percent within twelve months, and even some people 0:15:58.800 --> 0:16:03.440 are saying single dig it's UM by two thousand nineteen. 0:16:03.880 --> 0:16:05.800 So that's one thing. And the other thing is the 0:16:05.880 --> 0:16:11.840 debt market. You know, in Argentina is UM outperforming most 0:16:11.840 --> 0:16:17.520 emerging markets, and UM that's a real turnaround. So those 0:16:17.560 --> 0:16:20.480 are the two things he's done. They're both big, and 0:16:20.560 --> 0:16:25.239 he's brought Argentina actually to the forefront of global investors 0:16:25.280 --> 0:16:30.080 by making it the best performing market in Latin America. 0:16:30.240 --> 0:16:34.240 And that that wonderful streak that you referred to at 0:16:34.280 --> 0:16:39.520 the outset here, Um, that's the longest winning streak for 0:16:39.560 --> 0:16:43.640 the stock market since it's it's just shocking, really the 0:16:43.760 --> 0:16:48.320 rally here, especially considering the vitriolic decade long battle between 0:16:48.320 --> 0:16:52.320 creditors in Argentina after its latest default. It has defaulted 0:16:52.400 --> 0:16:54.520 numerous times in its sovereign debt. And here you're looking 0:16:54.560 --> 0:16:57.440 at Argentinian bonds price in US dollars that have rally 0:16:57.520 --> 0:17:00.800 nearly thirteen percent so far this year. Matt, can you 0:17:00.840 --> 0:17:04.320 give us a sense of what President McCree said to 0:17:04.359 --> 0:17:08.240 you that gave you confidence that they could continue on 0:17:09.040 --> 0:17:12.440 a rather auspicious path. So there are two things that 0:17:12.600 --> 0:17:16.880 make him um, if you will, a unique um. One 0:17:17.040 --> 0:17:23.200 is he's the first leader president elected who isn't a 0:17:23.280 --> 0:17:27.280 parnast in a hundred years, nor is he affiliated with 0:17:27.320 --> 0:17:29.800 any of the left wing alternatives. So he's right in 0:17:29.800 --> 0:17:33.359 the center, and he's a bit of a pragmatist and 0:17:33.640 --> 0:17:36.680 very practically. He's an engineer by training, so he looks 0:17:36.680 --> 0:17:40.480 at things very analytically. Um. So that's one thing. The 0:17:40.520 --> 0:17:43.520 second thing is he said to us, you know, I'm 0:17:43.520 --> 0:17:47.800 committed to reducing poverty. Now you wouldn't necessarily expect that 0:17:47.880 --> 0:17:52.600 from someone who is in the center, and yet he's 0:17:52.680 --> 0:18:01.800 managed to embrace a very um pluralistic, diverse constituency in Argentina. 0:18:02.040 --> 0:18:04.879 You know, both people who are well off and people 0:18:04.920 --> 0:18:08.560 who are the opposite. I think that's what sets him apart. 0:18:09.320 --> 0:18:11.760 Does he it was there any conversation or does he 0:18:11.840 --> 0:18:14.360 recognize that there are a lot of rules and regulations 0:18:14.400 --> 0:18:17.679 about the kinds of investments that made in Argentina and 0:18:17.720 --> 0:18:21.359 the reciprocity that exists. So, for example, BMW how to 0:18:21.440 --> 0:18:25.280 export a certain amount that equal the amount of automobiles 0:18:25.280 --> 0:18:27.200 they sold. I mean, they're all these wacky rules there. 0:18:27.320 --> 0:18:34.000 He would given his brothers, he would eliminate, via many reforms, 0:18:34.160 --> 0:18:39.680 most of the bottlenecks that you've just identified that prevent 0:18:40.040 --> 0:18:43.320 the economy from performing as it should. And he's committed 0:18:43.359 --> 0:18:46.080 to doing so. But he recognizes, and he says as 0:18:46.200 --> 0:18:50.680 much when we speak with him, that it can happen overnight, 0:18:50.800 --> 0:18:53.320 and he has to essentially bring people with him, and 0:18:53.400 --> 0:18:57.359 he can't do anything that would be considered too abrupt 0:18:58.240 --> 0:19:01.840 because he would lose the opportunity to do the big stuff. 0:19:01.880 --> 0:19:05.240 So he's got to focus on a kind of gradualistic 0:19:05.840 --> 0:19:10.720 approach to reform. I was struck by an article on 0:19:10.760 --> 0:19:14.879 the Blueberg earlier this month where or actually it was 0:19:14.960 --> 0:19:18.000 last year, but Lawrence Fink, the head of black Rock, 0:19:18.160 --> 0:19:22.040 was talking about meeting with President McCree UH and that 0:19:22.119 --> 0:19:25.720 this convinced black Rock to be long term investors in 0:19:25.760 --> 0:19:29.920 the nation. And this struck me as particularly interesting that 0:19:30.400 --> 0:19:34.080 McCree was aligning himself with Wall Street even after what happened. 0:19:34.320 --> 0:19:40.000 How important is that to his success? Very because you know, 0:19:40.080 --> 0:19:45.159 Larry Fink is UH running, if you will, the largest 0:19:45.520 --> 0:19:54.639 money management concern UM. And Argentina needs global investors because 0:19:54.760 --> 0:19:59.199 so much of its financing is done through the liquidity 0:19:59.280 --> 0:20:01.720 that comes out of the global market. So as long 0:20:01.760 --> 0:20:06.880 as the global market is UH poised to do what 0:20:07.119 --> 0:20:10.639 Argentina needs, that's good for Argentina. It does not have 0:20:10.840 --> 0:20:15.480 at the moment anything like the financial system domestically that 0:20:15.480 --> 0:20:18.800 would enable it to do what it needs to do so. 0:20:19.119 --> 0:20:22.919 Global investors are all important in having Larry think um, 0:20:23.640 --> 0:20:28.119 cheering you on is a good thing. The government budget deficits. 0:20:28.400 --> 0:20:31.040 Did he speak at all about trying to reign in 0:20:31.160 --> 0:20:35.400 the government. His priority is to reduce what is known 0:20:35.440 --> 0:20:41.600 as the fiscal deficit um, and he is very public 0:20:41.640 --> 0:20:45.959 about that that it's an essential part of getting Argentina 0:20:46.080 --> 0:20:53.399 to be um economically and sustainably prosperous. How popular is 0:20:53.400 --> 0:20:57.119 he at this point popular enough? You know, he's not 0:20:57.680 --> 0:21:06.359 charismatic in the traditional uh peronist Argentina politician. However, having 0:21:06.440 --> 0:21:09.640 been through, if you will, so many disappointments, the people 0:21:09.640 --> 0:21:12.240 of Argentina are prepared to accept somebody who's a little 0:21:12.240 --> 0:21:16.000 bit less charismatic and more pragmatic. And that's how he 0:21:16.119 --> 0:21:21.200 has managed to be credible even after almost two years 0:21:21.240 --> 0:21:26.000 in office, where he is essentially said, I'm translating a 0:21:26.000 --> 0:21:31.320 bit um. You know, no gain without pain. Well, I'm 0:21:31.359 --> 0:21:33.800 just struck by the idea that in emerging markets we're 0:21:33.840 --> 0:21:38.520 seeing the moderates taking a more prominent role, where as 0:21:38.880 --> 0:21:43.639 in developed nations you're seeing populists. You know, you can't 0:21:43.640 --> 0:21:47.359 make this up. Um that among the top leaders in 0:21:47.480 --> 0:21:51.400 terms of respect and credibility in the world today. This 0:21:51.480 --> 0:21:54.840 man uh Macary is right at the top. I mean, 0:21:55.000 --> 0:21:58.000 and if if any of us thought about it just 0:21:58.119 --> 0:22:02.879 fifteen months ago, we just said that's that's impossible. So um, 0:22:02.920 --> 0:22:06.280 you know, this is a big surprise. Met Winkler, thank 0:22:06.320 --> 0:22:08.399 you so much for joining us. Always a pleasure to 0:22:08.400 --> 0:22:12.679 have you. Met Winkler, Editor in Chief Emeritus of Bloomberg News. 0:22:15.280 --> 0:22:17.840 Thanks for listening to the Bloomberg P and L podcast. 0:22:18.160 --> 0:22:22.080 You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, 0:22:22.200 --> 0:22:25.640 or whatever podcast platform you prefer. I'm pim Fox. I'm 0:22:25.680 --> 0:22:29.240 on Twitter at pim Fox. I'm on Twitter at Lisa 0:22:29.280 --> 0:22:32.399 abramowits one before the podcast. You can always catch us 0:22:32.440 --> 0:22:34.040 worldwide on Bloomberg Radio.