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Bloomberg's Orlik Says China to Lose on Trade as U.S. Exits TPP · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim
• 0:07
  Speaker 1: Fox along with my co host Lisa Abramowitz. Each day
• 0:11
  Speaker 1: we bring you the most important, noteworthy, and useful interviews
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  Speaker 1: for you and your money, whether you at the grocery
• 0:16
  Speaker 1: store or the trading floor. Find the Bloomberg pm L
• 0:19
  Speaker 1: podcast on iTunes, SoundCloud and at Bloomberg dot com. I
• 0:28
  Speaker 1: want to learn more about what I should think about China.
• 0:31
  Speaker 1: You have some people saying that the economy is improving,
• 0:34
  Speaker 1: that things are looking up in the second biggest economy
• 0:38
  Speaker 1: in the world. Other people are saying, well they did
• 0:40
  Speaker 1: it with by increasing their debt by forty percentage points
• 0:44
  Speaker 1: in one year as a as a proportion of their
• 0:46
  Speaker 1: grocer beastic products. Gives some insight into this. I want
• 0:48
  Speaker 1: to bring in Tom or like Chief Asia Economists for
• 0:51
  Speaker 1: Bloomberg Intelligence, who is here with us in our Bloomberg
• 0:54
  Speaker 1: eleven three oh studio. Tom, China is it headed for
• 0:58
  Speaker 1: a terrible crash or is it taking a painful steps
• 1:03
  Speaker 1: to move toward a slow and steady recovery. The problems
• 1:06
  Speaker 1: definitely haven't gone away, as you mentioned stronger growth in
• 1:10
  Speaker 1: two thousand and sixteen, but very substantially driven by a
• 1:13
  Speaker 1: massive increase in bank lending. That said, relative to the
• 1:17
  Speaker 1: situation we were in a year ago, when, if you remember,
• 1:20
  Speaker 1: the equity market was collapsing, FX reserves were slumping, and
• 1:24
  Speaker 1: growth was still weak, the latest numbers we've have are
• 1:27
  Speaker 1: a little bit more positive. I want to just be
• 1:31
  Speaker 1: picked up at us on something that Lisa was talking
• 1:34
  Speaker 1: about having to do with China. Is is it possible to,
• 1:38
  Speaker 1: on the one hand, look at the economy as distinct
• 1:42
  Speaker 1: from the investment outlook, because I'm never able to really
• 1:48
  Speaker 1: reconcile those two things. But also because of the comments
• 1:52
  Speaker 1: by Kyle Bass, what exactly is he is He's saying
• 1:56
  Speaker 1: the country is going to collapse. I think if you
• 2:00
  Speaker 1: look across the world, the world's major economies for the
• 2:02
  Speaker 1: last decade, the financial market story and the real economy
• 2:06
  Speaker 1: story has been very firmly detached. Right Um, real economy US, China,
• 2:13
  Speaker 1: Japan not looking so great hasn't necessarily meant that the
• 2:17
  Speaker 1: investment story has always been negative in China. Right now,
• 2:21
  Speaker 1: it's a little bit the reverse. The real economy numbers
• 2:24
  Speaker 1: are looking pretty solid, but with these rumblings, these concerns
• 2:28
  Speaker 1: about the unsustainable nature of credit expansion. Investors like Carl
• 2:33
  Speaker 1: Bass still don't see this is a good time to
• 2:35
  Speaker 1: go in. I'm going to push back on that a
• 2:36
  Speaker 1: little bit because during two thousand and eight we learned
• 2:40
  Speaker 1: that the real economy and the financial system were perhaps
• 2:43
  Speaker 1: a little bit more intertwined than some people were experiencing.
• 2:45
  Speaker 1: And one concern in China is that with this incredible
• 2:49
  Speaker 1: expansion of credit, you're seeing some cracks that are emerging
• 2:53
  Speaker 1: and some signs that consumers could end up being the
• 2:55
  Speaker 1: ones that are slammed, whether they're taking leverage out to
• 2:58
  Speaker 1: go buy penny shares are set July, or taking out
• 3:01
  Speaker 1: loans to buy a home. I mean, do you foresee
• 3:04
  Speaker 1: is there a catalyst on the horizon that could bring
• 3:08
  Speaker 1: these strains in this excessive leverage to a head in China?
• 3:12
  Speaker 1: I think the catalyst could be right here in the US.
• 3:15
  Speaker 1: If we see an accelerated tightening path from the FED,
• 3:19
  Speaker 1: that's going to mean a tough choice for China's policymakers.
• 3:23
  Speaker 1: Do they follow the dollar up or do they keep
• 3:27
  Speaker 1: the un down to retain trade, to retain export competitiveness.
• 3:31
  Speaker 1: If they do the second, the risk is we're going
• 3:34
  Speaker 1: to see very substantial capital light flows that could start
• 3:37
  Speaker 1: crystallizing some of the risks in the financial system, which
• 3:40
  Speaker 1: are the main focus for global investors. As someone that
• 3:43
  Speaker 1: focuses on the economy of China and on Asia, maybe
• 3:48
  Speaker 1: you could speak about the integration of Hong Kong, Taiwan
• 3:52
  Speaker 1: and the Chinese economy and what would happen to those
• 3:56
  Speaker 1: markets which may be more easily investable for some What
• 4:00
  Speaker 1: would happen to those markets given this Kyle Bass scenario
• 4:03
  Speaker 1: for China, Well, my view is that the doomsday scenario
• 4:08
  Speaker 1: for China is overplayed. Um. I think that China's policymakers
• 4:14
  Speaker 1: retain considerable policy space, which means we're very unlikely to
• 4:18
  Speaker 1: see a messy unwinding of China's unbalances on a one
• 4:22
  Speaker 1: to three year time horizon. Now, if I'm wrong and
• 4:26
  Speaker 1: we do see that messy unwinding, if we do see
• 4:29
  Speaker 1: the risks in the financial system crystallizing in the short term, well,
• 4:33
  Speaker 1: if that happens, you can forget about Hong Kong and Taiwan. Um.
• 4:37
  Speaker 1: It's like all bets are off at that point, right,
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  Speaker 1: and it becomes almost a really political issue. The ripple
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  Speaker 1: effects would just go much wider. Um you'd feel them
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  Speaker 1: across all of Asia. You'd feel them here in the
• 4:48
  Speaker 1: US and in Europe. You know, you're based in China
• 4:53
  Speaker 1: and you have a good look on the ground at
• 4:56
  Speaker 1: the sentiment over here. When President basically shafted the Transport
• 5:03
  Speaker 1: Pacific Partnership and pulled the US out of it, there
• 5:07
  Speaker 1: was this feeling that China could potentially move is the
• 5:10
  Speaker 1: big economic power in the region and gain strength as
• 5:13
  Speaker 1: a result of this. What's your perspective, what's the perspective
• 5:16
  Speaker 1: from Beijing? UM? I think there's certainly a lot of
• 5:19
  Speaker 1: nervousness in Beijing about what the Trump administration is talking about.
• 5:23
  Speaker 1: UM Now, at a very surface level, if the US
• 5:26
  Speaker 1: reduces its trade and security commitments to the Asia Pacific region,
• 5:31
  Speaker 1: clearly China, as the region's largest economy, is going to
• 5:34
  Speaker 1: see an expansion of its influence, and we're already seeing
• 5:38
  Speaker 1: that in the South China. See we're seeing in more
• 5:40
  Speaker 1: infrastructure spending by Chinese firms in Southeast Asia. The question, though,
• 5:45
  Speaker 1: is that a positive or a negative for China. My
• 5:48
  Speaker 1: view is that China has been benefiting by free riding
• 5:51
  Speaker 1: on the U s Security Guarantee and the US guarantee
• 5:54
  Speaker 1: of open markets. If that's taken away, that's going to
• 5:57
  Speaker 1: be more of a cost than a benefit to China.
• 6:00
  Speaker 1: You give us just a quick primer on what that
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  Speaker 1: security benefit is, Well, it's a it's a very big picture,
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  Speaker 1: it's a very big picture analysis. Um. But the US
• 6:09
  Speaker 1: security guarantee, including troops in Japan, including troops in Korea,
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  Speaker 1: that's underwritten the peace and security of the Asia region.
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  Speaker 1: It's underwritten the freedom of shipping around the region. And China,
• 6:22
  Speaker 1: as the world's biggest trading nation, has benefited from that
• 6:26
  Speaker 1: peace and security. Just quickly, the controls that are in
• 6:31
  Speaker 1: place on companies in China to invest money outside the country. UH,
• 6:37
  Speaker 1: the State Administration of Foreign Exchange has asked these companies
• 6:42
  Speaker 1: with outbound investment plans to clarify the source of their
• 6:45
  Speaker 1: funding for purchases and it give additional details on their
• 6:49
  Speaker 1: spending plants. So this would mean that a company like
• 6:52
  Speaker 1: a Fox con wants to expand and build a plant
• 6:54
  Speaker 1: in the United States, that they would have to make
• 6:57
  Speaker 1: sure that the Chinese government knew the details of what
• 6:59
  Speaker 1: they wanted to do with the money. This is all
• 7:01
  Speaker 1: about the difficult decision China has to make on managing
• 7:04
  Speaker 1: the UN and managing cross border capital flows. Basically, they've
• 7:08
  Speaker 1: got a choice. They could allow the UN to float,
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  Speaker 1: which would be a good market based solution ultimately would
• 7:15
  Speaker 1: end the problem of capital light flows, but it would
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  Speaker 1: be a really high risk solution if they don't want
• 7:20
  Speaker 1: to allow the UN to float, and at the moment
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  Speaker 1: they don't seem to. They have to find some way
• 7:24
  Speaker 1: to stem the capital light flows. And that policy move
• 7:27
  Speaker 1: you just described to make it tougher for corporates to
• 7:30
  Speaker 1: take their funds out of China. That's a move in
• 7:33
  Speaker 1: that direction. Well, Don, thank you very much. Very interesting.
• 7:37
  Speaker 1: We look forward to having you on more in the future,
• 7:40
  Speaker 1: because this is obviously a topic that is only going
• 7:42
  Speaker 1: to gain in importance. Tom Orler is our chief Asia
• 7:46
  Speaker 1: economist for a Bloomberg Intelligence. He is based in Beijing
• 7:50
  Speaker 1: and he joins us here in our studios here in
• 7:53
  Speaker 1: New York. Ford Motor Company, the major Detroit auto company
• 8:10
  Speaker 1: that has been the target of quite a bit of
• 8:13
  Speaker 1: attention from our new president, just reported earnings that were
• 8:16
  Speaker 1: below analysts estimates and the shares are falling almost three percent.
• 8:20
  Speaker 1: I want to bring in Bob Shank's executive vice president
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  Speaker 1: and Chief financial officer of Ford, thank you for joining us.
• 8:27
  Speaker 1: So what do you think is the most important thing
• 8:30
  Speaker 1: that investors should take away from this earnings report? While
• 8:34
  Speaker 1: we were in line with the Bloomberg and First Call
• 8:36
  Speaker 1: at thirty cents a share in the quarter, what I
• 8:39
  Speaker 1: would take away from it is the strength of the
• 8:41
  Speaker 1: results across many parts of our business. We came in
• 8:44
  Speaker 1: with our second best profit for the full year, our
• 8:47
  Speaker 1: second best operating margin, our second best cash flow, so
• 8:51
  Speaker 1: it was very strong. And within that we had a
• 8:52
  Speaker 1: strong North America, a record profit in in Europe, UH
• 8:57
  Speaker 1: second best profit, and Asia Pacific and solid profits at
• 8:59
  Speaker 1: Ford Credit. So to me, it was the strength of
• 9:01
  Speaker 1: the result and the consistency of earnings over a seven
• 9:04
  Speaker 1: year period. So I think it was quite a quite
• 9:07
  Speaker 1: strong results for the company. Frankly, when one interesting note
• 9:11
  Speaker 1: was that Ford took a two hundred million dollar charge
• 9:15
  Speaker 1: as a result of closing the factory abandoning the factory
• 9:18
  Speaker 1: in Mexico as a result of smooth the UH discussions
• 9:22
  Speaker 1: with President Trump. Does this boat poorly for the road
• 9:25
  Speaker 1: ahead and how the relationship of the company will be
• 9:28
  Speaker 1: with the new president. No, I don't think so at all,
• 9:32
  Speaker 1: And and the reason that we canceled the plant is
• 9:34
  Speaker 1: from the time that we had made the decision to
• 9:37
  Speaker 1: do it, we saw small vehicles we're going to go
• 9:39
  Speaker 1: into the plant, small car specifically, and and what we
• 9:42
  Speaker 1: saw was continued and in fact accelerated the decline in
• 9:46
  Speaker 1: customer demand for those segments. So I think it was
• 9:49
  Speaker 1: that primarily, and then with the pro growth policies that
• 9:52
  Speaker 1: we expect the new administration to put in place ultimately, uh,
• 9:57
  Speaker 1: you know, that really made us comfortable with the decision,
• 10:00
  Speaker 1: despite the fact that we had just started overall development
• 10:03
  Speaker 1: of the site, so there was a charge associated with it.
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  Speaker 1: But we feel very very good about the plan that
• 10:07
  Speaker 1: we have going forward. And and as Mark said Mark Fields,
• 10:10
  Speaker 1: our CEO, a number of times um this week following
• 10:14
  Speaker 1: his two meetings with Mr Trump, I think we're very
• 10:16
  Speaker 1: encouraged by the pro growth attitude and um um the
• 10:23
  Speaker 1: bent of the administration. We just have to wait and
• 10:25
  Speaker 1: see what the specific policies will be. You know, Bob,
• 10:29
  Speaker 1: I just wanted to make mention that you've had a
• 10:32
  Speaker 1: long career at Ford. You were at Ford Motor, but
• 10:36
  Speaker 1: also you did Masda Motor, uh you know, and now
• 10:39
  Speaker 1: as the chief financial officer. You've you've survived a lot
• 10:43
  Speaker 1: in the automobile industry, and uh, I wonder if you
• 10:47
  Speaker 1: could speak from that perspective to um, did you think
• 10:51
  Speaker 1: that you and Mark thought that this is the kind
• 10:54
  Speaker 1: of stuff that you would be focused on now compared to,
• 10:57
  Speaker 1: let's say, what Alan Malali had to do, because these
• 11:02
  Speaker 1: are very different times, not only for your business, but
• 11:05
  Speaker 1: interestingly for your relationship with with Washington. You make my
• 11:12
  Speaker 1: career sound like I just was the most horrible thing
• 11:14
  Speaker 1: anyone could go through it. Well, I mean, and I'm
• 11:17
  Speaker 1: not horrible, but I mean, in other words, you've been there,
• 11:19
  Speaker 1: You've witnessed this, right, I mean, come on, this is
• 11:21
  Speaker 1: this is what actually happened. Well, you know what, it's
• 11:23
  Speaker 1: a great point that you're making. I mean, one of
• 11:25
  Speaker 1: the things that is really exciting but also something you
• 11:28
  Speaker 1: have to deal with and learn how from a government standpoint,
• 11:31
  Speaker 1: is how you run these businesses. They are so big,
• 11:34
  Speaker 1: and they're so complicated, and they're so affected by literally
• 11:37
  Speaker 1: everything that happens around the world. And you're right, I mean,
• 11:40
  Speaker 1: now is a different era than when Alan was here
• 11:42
  Speaker 1: and I worked with Alan that was restructuring. Now we're
• 11:45
  Speaker 1: into you know, stabilizing the business at a high level
• 11:48
  Speaker 1: and then growing particularly in areas that are going to
• 11:50
  Speaker 1: be brand new not only to us, but the whole
• 11:52
  Speaker 1: sector enabled by technology. So it's a completely different focus there.
• 11:57
  Speaker 1: And then, as you said, we've got a new administration.
• 11:59
  Speaker 1: I mean you could be probably couldn't have a you know,
• 12:01
  Speaker 1: a sharper right turn or left tern, whichever way you
• 12:03
  Speaker 1: want to characterize it from the prior administration. Um, it
• 12:07
  Speaker 1: looks positive so far in terms of how everyone feels
• 12:10
  Speaker 1: the direction of the administration in terms of pro growth policies,
• 12:14
  Speaker 1: but we don't have details yet. So well, well, the
• 12:17
  Speaker 1: thing that's positive though is that we're engaged in the
• 12:19
  Speaker 1: dialogue and the conversation with the administration, with Congress and
• 12:23
  Speaker 1: uh so I think we feel that we're you know,
• 12:25
  Speaker 1: we're part of that conversation, and then we feel good
• 12:27
  Speaker 1: about that. In Ford's earnings, uh, the compantee reiterated guidance
• 12:32
  Speaker 1: that earnings will drop this year as begins to invest
• 12:34
  Speaker 1: about four and a half billion dollars towards electronification and
• 12:38
  Speaker 1: uh and spending on self driving vehicles. In this kind
• 12:42
  Speaker 1: of environment, how many new jobs can it can afford? Really?
• 12:47
  Speaker 1: Create in the US. Well, that's a good question too.
• 12:51
  Speaker 1: We've created, you know, quite a number of jobs. Thinking
• 12:54
  Speaker 1: it's twenty eight sous and I think is the number
• 12:56
  Speaker 1: that's on the top of my head over the last
• 12:57
  Speaker 1: five years and in the United States own. I think
• 13:01
  Speaker 1: going forward, these new emerging opportunities represent not only big
• 13:05
  Speaker 1: opportunities for US, but potentially opportunities to in terms of
• 13:08
  Speaker 1: providing you know, great jobs for people not only here
• 13:11
  Speaker 1: in the US, but elsewhere in the world. So, but
• 13:14
  Speaker 1: the thing I guess I would say, um him, is
• 13:17
  Speaker 1: that you know, a lot of that though, will be
• 13:19
  Speaker 1: you know, or I'm sorry, at least it will be
• 13:20
  Speaker 1: further out in the future. Uh, in terms of the
• 13:23
  Speaker 1: benefit to us, because if you think about what we're
• 13:26
  Speaker 1: talking about automas vehicle coming electrification, Uh, what's the point
• 13:32
  Speaker 1: in time where that is going to make economic senses
• 13:35
  Speaker 1: versus an internal combustion engine. Probably in the next decade.
• 13:38
  Speaker 1: So we have to keep you know, we have to
• 13:39
  Speaker 1: move in that direction. But think about the pace of
• 13:42
  Speaker 1: that and a lot of the mobility services that we
• 13:45
  Speaker 1: believe we can offer in the future. You know, we're
• 13:47
  Speaker 1: just creating and working on right now, so that that
• 13:49
  Speaker 1: that future is ahead of us and we're excited about it,
• 13:52
  Speaker 1: and I do think it will generate job opportunities. Hey, Bob,
• 13:56
  Speaker 1: can you speak to the issue of you cars and
• 14:01
  Speaker 1: leases and the whole financing, because we've been speaking with
• 14:05
  Speaker 1: a variety of people. Uh, you know, you start off saying, Okay,
• 14:08
  Speaker 1: more people are doing leases, but now there's going to
• 14:12
  Speaker 1: be a flood of used car on the market and
• 14:15
  Speaker 1: that's going to hurt prices. We saw you know, Hurts
• 14:18
  Speaker 1: got hit with with that the other day. Could you
• 14:21
  Speaker 1: just give us your your thoughts on that. Yeah, that's
• 14:25
  Speaker 1: another important aspect of the business that's occurring right now.
• 14:29
  Speaker 1: And and just the levels that you first of all,
• 14:31
  Speaker 1: in terms of the Ford credits own uh participation in
• 14:35
  Speaker 1: that for the year, for the full year, we came
• 14:38
  Speaker 1: in at in terms of mix of participation in the
• 14:42
  Speaker 1: lease that's exactly the same as it was the year prior,
• 14:45
  Speaker 1: and I think roughly the same as the year before that.
• 14:46
  Speaker 1: So we haven't we have not moved up in terms
• 14:49
  Speaker 1: of the degree to which we're um we're leasing at
• 14:53
  Speaker 1: least through Ford credit. The industry is though, uh, it
• 14:57
  Speaker 1: moved from and fifteen the third percent this year and
• 15:01
  Speaker 1: you're right, as you know, think about higher leasing and
• 15:04
  Speaker 1: the industry sales have been increasing, so there is a
• 15:06
  Speaker 1: large number of least off lease vehicles that will be
• 15:11
  Speaker 1: coming back to the market over the next several years.
• 15:14
  Speaker 1: That is affecting used vehicle prices through the auctions. It
• 15:18
  Speaker 1: certainly has had an impact on our least portfolio afford credit.
• 15:21
  Speaker 1: So it's not just us because again we haven't participated
• 15:24
  Speaker 1: in that growth to that degree, but it's a broader
• 15:27
  Speaker 1: industry and I think that's probably one of the signs
• 15:29
  Speaker 1: that will suggest, you know, that we are getting in
• 15:32
  Speaker 1: the latter part of the economic cycle that we're in.
• 15:35
  Speaker 1: So in response to that, what we've done is, you know,
• 15:37
  Speaker 1: we have limited, uh, the degree to which we're going
• 15:40
  Speaker 1: to be leasing to around that level that I just
• 15:43
  Speaker 1: mentioned and looking at other alternatives. We've got to leave
• 15:46
  Speaker 1: it there, Thanks very much. We got to run. Bob Shanks.
• 15:49
  Speaker 1: He is the chief financial officer of four Should it
• 16:03
  Speaker 1: be stocks, should it be bonds? What should you be
• 16:05
  Speaker 1: doing with your money? Peter Anderson is the chief investment
• 16:08
  Speaker 1: officer and the vice president of Fiduciary Trust based in Boston.
• 16:13
  Speaker 1: Always a pleasure, Peter, I was looking at a comparison
• 16:16
  Speaker 1: between the dividend yield on the SMP five hundred of
• 16:21
  Speaker 1: about two point oh four percent to be precise, right,
• 16:25
  Speaker 1: so two percent on the SMP of five hundred. But
• 16:28
  Speaker 1: then when I look and I say, oh, ten year,
• 16:30
  Speaker 1: the tenure treasury is more than two and a half percent,
• 16:34
  Speaker 1: it's two point five. What do you say to that? Boy,
• 16:38
  Speaker 1: There's so much to be talking about at this point.
• 16:41
  Speaker 1: You know, right now, there is so much news happening
• 16:45
  Speaker 1: from the Trump administration that UM people seem to be
• 16:49
  Speaker 1: suspending any kind of analytics, especially the question that you
• 16:53
  Speaker 1: were just asking, you know, what is what does that
• 16:54
  Speaker 1: tell us right now? And I would tell you that
• 16:57
  Speaker 1: for the past two to three weeks, I think there
• 17:00
  Speaker 1: is so much data coming in that nobody has the
• 17:03
  Speaker 1: wherewithal to actually make any analytic statements at this point.
• 17:07
  Speaker 1: It's a highly unusual period in this rolling disclosure that
• 17:11
  Speaker 1: we have of new Trump policies and trying to adjust
• 17:15
  Speaker 1: that into the market really doesn't seem to be UM
• 17:19
  Speaker 1: calibrating at all, and it's a highly unusual time. Given
• 17:24
  Speaker 1: that backdrop. Do you still think that rotating out of
• 17:27
  Speaker 1: fixed in coming into equities? Uh? Could likely be a
• 17:31
  Speaker 1: doomed strategy, as you suggested a recent report. Well, not
• 17:35
  Speaker 1: necessarily doomed. I think that there's always a place for
• 17:39
  Speaker 1: fixed income we and especially this time of the period
• 17:43
  Speaker 1: of the cycle. Most people would probably say, well, it's
• 17:46
  Speaker 1: like sticking your hand into an open flame at this point,
• 17:49
  Speaker 1: because of course all of us have a bias towards
• 17:51
  Speaker 1: raising the rates will be increasing. But even if that's
• 17:55
  Speaker 1: the case, you still need a buffer. We don't really
• 17:58
  Speaker 1: know how many of these these are actually going to
• 18:01
  Speaker 1: be implemented, and let's just take a position where we
• 18:05
  Speaker 1: think that maybe not all of them will be. Then
• 18:08
  Speaker 1: the market is so sensitive right now the equity market
• 18:10
  Speaker 1: that I could see that trading. Often if you're left
• 18:13
  Speaker 1: totally inequities, then it doesn't really give you any kind
• 18:16
  Speaker 1: of a buffer capability. So fixed income, especially high grade
• 18:20
  Speaker 1: fixed income, in spite of the fact that rates are rising,
• 18:23
  Speaker 1: you always need to have some amount of exposure, I think,
• 18:26
  Speaker 1: just to be prudent um. I've been reading a lot
• 18:29
  Speaker 1: of investment reports that have been coming out, and one
• 18:32
  Speaker 1: theme consistent throughout has been that there are fatter tails
• 18:35
  Speaker 1: on either end. In other words, the worst case scenarios
• 18:37
  Speaker 1: are worse and the better case scenarios are better. What's
• 18:40
  Speaker 1: your worst case scenario and best case scenario? Well, of course,
• 18:45
  Speaker 1: I think, you know, being a political in this discussion,
• 18:48
  Speaker 1: I think the best case scenario, if you're just looking
• 18:51
  Speaker 1: at the markets and you're trying to get the best returns,
• 18:55
  Speaker 1: would be that the majority of the policies that are
• 18:58
  Speaker 1: being presented would be a opted. And longer term that's debatable,
• 19:03
  Speaker 1: but if you're looking at for say the next three years,
• 19:08
  Speaker 1: I do think the best scenario for a lot of
• 19:11
  Speaker 1: industries would be for the Trump policies to come into play.
• 19:16
  Speaker 1: The worst case scenario would be, perhaps if none of
• 19:19
  Speaker 1: these are in play, and everybody has to go back
• 19:23
  Speaker 1: to their Boomberg terminals and reassess the outlook that we
• 19:28
  Speaker 1: have gotten so used to. I would say in over
• 19:30
  Speaker 1: six weeks now, we are very hused to adopting. Uh,
• 19:34
  Speaker 1: you know, in our analytic process that most of these
• 19:38
  Speaker 1: policies will come through and improving cash flows, etcetera. There
• 19:41
  Speaker 1: could be really a negative scenario easily painted if none
• 19:47
  Speaker 1: of these things is passed. Well, Peter, you know we
• 19:50
  Speaker 1: I kind of put you in a in a tough
• 19:51
  Speaker 1: position because we started at such a general level, you know,
• 19:55
  Speaker 1: bonds versus versus stocks, Maybe just share with people a
• 19:59
  Speaker 1: little bit of your specific background in terms of the
• 20:04
  Speaker 1: investments that you have made and your rational for these investments,
• 20:07
  Speaker 1: because I think this speaks to an issue of active
• 20:11
  Speaker 1: versus passive management. Because you have such an idiosyncratic moment
• 20:17
  Speaker 1: that it is very hard to use any kind of
• 20:20
  Speaker 1: analytical system. It now relies on personal experience, and I'm
• 20:24
  Speaker 1: wondering if you would share that with us. It exactly
• 20:26
  Speaker 1: doesn't I mean him if you look at the volatility
• 20:29
  Speaker 1: and exper instance of VIX tremendously low at this point,
• 20:32
  Speaker 1: correlations low. Uh. Yet normally I think we all three
• 20:37
  Speaker 1: of us would agree if there were any singular surprises
• 20:41
  Speaker 1: like we've had, you know collectively now, but just pick
• 20:44
  Speaker 1: one of these announcements. Normally the markets would respond immediately
• 20:48
  Speaker 1: and would take a quite a while to work that
• 20:50
  Speaker 1: through the system of rationality. But there are so many
• 20:53
  Speaker 1: surprises that I think the you know we're in we're
• 20:57
  Speaker 1: suffering from indigestion in a sense that we cannot do that.
• 21:00
  Speaker 1: So here's what we recommend is that you have to
• 21:03
  Speaker 1: step back and you have to say, what is the baseline.
• 21:06
  Speaker 1: You know, there's a lot of noise, and hopefully the
• 21:09
  Speaker 1: noise will become facts. But right now you can say
• 21:12
  Speaker 1: to yourself, is there a baseline of investment philosophy that
• 21:15
  Speaker 1: I believe in? And can I pick securities based on
• 21:19
  Speaker 1: the intrinsic attractiveness of the these stocks for instance? And
• 21:24
  Speaker 1: on top of that, if you can find UH tail
• 21:27
  Speaker 1: winds that they might enjoy as a result of favorable
• 21:31
  Speaker 1: findings on these policies, then you've got a double. But
• 21:34
  Speaker 1: right now we're just looking for a single. So let
• 21:37
  Speaker 1: me just give you a quick example. I mean only
• 21:39
  Speaker 1: gonna give you ten seconds. Key Bank, for instance. Take
• 21:41
  Speaker 1: a look at that because that has a basic fundamentals
• 21:44
  Speaker 1: are very attractive and if Trump's policies go through with
• 21:47
  Speaker 1: infrastructure spending, then it will actually be even a better stock.
• 21:51
  Speaker 1: Thank you so much for joining us. Peter Anderson, chief
• 21:54
  Speaker 1: investment officer and vice president a fiduciary trust in Boston. Well,
• 22:10
  Speaker 1: I bet they also know the new Commerce Secretary of
• 22:13
  Speaker 1: the United States, Wilburt Ross, nominated to be UH Commerce
• 22:17
  Speaker 1: Secretary by President Trump. Here to tell us more. Max Abelson,
• 22:21
  Speaker 1: Finance reporter, Bloomberg News. You can follow him on Twitter
• 22:25
  Speaker 1: at Max Abelson. Okay, at Max Abelson tell us about
• 22:30
  Speaker 1: this story. I read it and I got my own thoughts.
• 22:33
  Speaker 1: But you you tell us what you laid out for people, Pam,
• 22:36
  Speaker 1: thank you. So you know, Bloomberg News has spent a
• 22:39
  Speaker 1: lot of time in the last few weeks talking about
• 22:41
  Speaker 1: the six billion dollar cabinet, and there's a lot of
• 22:43
  Speaker 1: folks on people like Stephen Manuchin. Where out the profile
• 22:45
  Speaker 1: of Zach Miighter a couple of months ago, or you know,
• 22:49
  Speaker 1: really almost anyone has has gotten more attention than than
• 22:52
  Speaker 1: the richest man of them all, Wilbur Ross. He's a
• 22:55
  Speaker 1: private equity executive, is I'm sure our listeners know us
• 22:57
  Speaker 1: an investment banker for decades, and considering that he's going
• 23:01
  Speaker 1: to have responsibility to fulfill some of the more populous
• 23:04
  Speaker 1: promises from Trump on the campaign trail, promises about jobs
• 23:08
  Speaker 1: and manufacturing and trade, even infrastructure, we thought it would
• 23:11
  Speaker 1: make sense to take a look at ad Amanda and
• 23:13
  Speaker 1: his career. So Max, just from a big picture perspective,
• 23:18
  Speaker 1: what power does the Secretary of Commerce really have? Lisa,
• 23:22
  Speaker 1: That's a good question because historically the answer is, at
• 23:25
  Speaker 1: least relatively not much. Um, this didn't make it into
• 23:29
  Speaker 1: the piece actually, but you know there was a there's
• 23:31
  Speaker 1: a Commerce secretary under Reagan who died because he was
• 23:34
  Speaker 1: roping steer while he was while he was commverse secretary.
• 23:37
  Speaker 1: Then there was a Commerce Secretary, Ron Brown under Clinton
• 23:39
  Speaker 1: who died in an airplane crash. Um. And then actually
• 23:43
  Speaker 1: after that happened, Um, Obama tried to sort of reshuffle
• 23:48
  Speaker 1: the entire structure of Commerce and u str so the
• 23:51
  Speaker 1: converse secretary might have actually gone away. But Wilbur Ross
• 23:54
  Speaker 1: is gonna be important, and it's gonna be important because
• 23:56
  Speaker 1: he had Donald Trump's ear. They've known each other since
• 23:58
  Speaker 1: about Wilbur Ross actually helps save Trump at the truck
• 24:01
  Speaker 1: kaj Mahal he was representing bond holders. Um. And he's
• 24:05
  Speaker 1: going to be important because he's going to have, um,
• 24:07
  Speaker 1: some real muscle when it comes to being in charge
• 24:09
  Speaker 1: of trade stuff. And he's already had input into these
• 24:13
  Speaker 1: sort of these proposals for public private infrastructure funding. Well, Max,
• 24:17
  Speaker 1: why don't you tell us some details about Wilbert Rouss.
• 24:19
  Speaker 1: What did you discover? So the complicated thing about Wilburg
• 24:25
  Speaker 1: and the reason you have to go back, did he
• 24:27
  Speaker 1: speak with you for this story. No. Actually, I had
• 24:29
  Speaker 1: been emailing because he's been interviewed, oh he until recently.
• 24:34
  Speaker 1: He's a man who loves the press. But I got
• 24:36
  Speaker 1: an email back from his assistant who said, please do
• 24:38
  Speaker 1: not contact anyone at W. A. Ross or anyone who's
• 24:41
  Speaker 1: ever worked here. And then afterwards I got an email
• 24:43
  Speaker 1: with recommendations of people they did want me to talk
• 24:46
  Speaker 1: to you, And it was like literally like billionaires and
• 24:49
  Speaker 1: political leaders, um, some of whom I did end up
• 24:52
  Speaker 1: talking to. But just Lisa to go to answer your
• 24:54
  Speaker 1: excellent question and going back in time. The reason Wilbert
• 24:58
  Speaker 1: Ross is a rich man um over generalizes that he
• 25:01
  Speaker 1: was a steel magnate, and he was a steel magnate, um,
• 25:05
  Speaker 1: right as terrorifts were coming in. This is like think
• 25:06
  Speaker 1: like two thousand to two thousand three. But the real, um,
• 25:11
  Speaker 1: the fascinating thing is that, of course, if you're a
• 25:13
  Speaker 1: US steel magnate, you're basically a protectionist. You don't like
• 25:16
  Speaker 1: steel coming in from other countries. So of course he
• 25:19
  Speaker 1: was a protectionist. And then he sold it to an
• 25:22
  Speaker 1: Indian billionaire, sold his steel holdings and he became a
• 25:25
  Speaker 1: textiles magnate, and then all of a sudden he became
• 25:28
  Speaker 1: a free trader, and he did projects in China and Vietnam,
• 25:32
  Speaker 1: even Nicaragua. Um. But of course we know what's happened
• 25:37
  Speaker 1: in the last year. He's become with Peter Navarro a
• 25:39
  Speaker 1: sort of anti China voice. So one of the things
• 25:42
  Speaker 1: that the piece follows is how he's flipped um, you know,
• 25:46
  Speaker 1: several times over his career, which, which is something that
• 25:48
  Speaker 1: business men do, is just of course in politics, that's
• 25:50
  Speaker 1: it's sort of frowned upon. Well, I want to pick
• 25:53
  Speaker 1: up on that very theme, Max, because when you described
• 25:56
  Speaker 1: Wilbur Ross and his prowess in business, it would occur
• 26:02
  Speaker 1: to me that if you're thinking of running an enterprise
• 26:04
  Speaker 1: as a business, this is someone that you would want
• 26:07
  Speaker 1: on your team because they know how to succeed at
• 26:11
  Speaker 1: the business. When you say that, I'm reminded of an
• 26:14
  Speaker 1: anecdote that I that I heard from a leader of
• 26:17
  Speaker 1: Amalgamated Bank, which is a sort of a real almost
• 26:20
  Speaker 1: literally like an Occupy Wall Street bank. They I think
• 26:22
  Speaker 1: Occupy Wall Street really did bank with with Amalgamated whatever
• 26:25
  Speaker 1: savings it had, and Wilbur Ross in two twelve invested
• 26:30
  Speaker 1: fifty about fifty million dollars. W all Ross did into
• 26:33
  Speaker 1: Amalgamated and Ed Griebo, who is the CEO at the time,
• 26:36
  Speaker 1: remembers like waking up and watching on business television Wilbur
• 26:39
  Speaker 1: Ross sort of you know, railing against uh. You know,
• 26:43
  Speaker 1: for example, he was supportive amt Romney and he was
• 26:45
  Speaker 1: actually even publicly supportive at Romney's claim that of Americans
• 26:49
  Speaker 1: are freeloaders. Remember that Wilbur Ross supported him and and
• 26:52
  Speaker 1: Agreebau remembers sort of like watching him at six in
• 26:55
  Speaker 1: the morning on business TV, uh, you know, being sort
• 26:57
  Speaker 1: of a written Romney supporter. And then at nine and
• 27:00
  Speaker 1: they'd meet for a breakfast meeting, and Wilber Ross would
• 27:02
  Speaker 1: be completely supportive of Amalgamated Bank. And you know, you
• 27:05
  Speaker 1: might come, you might listen to an anecdote like that,
• 27:08
  Speaker 1: depending on your perspective and think, well, that's like hypocrisy,
• 27:12
  Speaker 1: or if you're a businessman you could say, or a
• 27:14
  Speaker 1: business person you would say, yeah, that that's what that's
• 27:17
  Speaker 1: that's what it's all about. You just wasn't maximize profits
• 27:19
  Speaker 1: and not worry about anything else. Max Abelson, thank you
• 27:22
  Speaker 1: so much for joining us. Truly tremendous story. Definitely I
• 27:25
  Speaker 1: recommend the read Max Abelson, finance reporter at Bloomberg News.
• 27:29
  Speaker 1: Here with us in the Bloomberg eleven three oh Studio.
• 27:37
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 27:40
  Speaker 1: You can subscribe and listen to interviews at iTunes, SoundCloud,
• 27:44
  Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm
• 27:48
  Speaker 1: out there on Twitter at pim Fox. I'm out there
• 27:51
  Speaker 1: on Twitter at Lisa Abramo. It's one before the podcast.
• 27:54
  Speaker 1: You can always catch us worldwide on Bloomberg Radio. Did
• 28:00
  Speaker 1: the Round the Bay