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P&L: TPP Is Dead, Former Adviser to Bill Clinton Says · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:14
  Speaker 1: you and your money, whether at the grocery store or
• 0:16
  Speaker 1: the trading floor. Find the Bloomberg P and L Podcast
• 0:20
  Speaker 1: on iTunes, SoundCloud and at Bloomberg dot com. Let's turn
• 0:29
  Speaker 1: our attention now to the world of international trade with
• 0:32
  Speaker 1: Robert Lawrence. He is Professor of International Trade and Investment
• 0:35
  Speaker 1: at the John F. Kennedy School of Government at Harvard University.
• 0:38
  Speaker 1: He's also a Senior Fellow at the Peterson Institute for
• 0:41
  Speaker 1: International Economics. He's also a former economic advisor to President
• 0:46
  Speaker 1: Bill Clinton. Joining us from Boston home to Bloomberg t D.
• 0:49
  Speaker 1: Robert Lawrence, How are you, sir? I'm very good. Thank
• 0:52
  Speaker 1: you all right? So, what you know if you are
• 0:54
  Speaker 1: going to be a trade advisor to foreign governments, particularly
• 0:59
  Speaker 1: a China right now, what would you be telling them
• 1:01
  Speaker 1: about the direction of U. S Trade policy? Well, I
• 1:05
  Speaker 1: tell them that they have to take uh President Trump
• 1:10
  Speaker 1: very seriously because although you need the Congress to approve
• 1:15
  Speaker 1: trade agreements unilaterally, on his own, the President has the
• 1:20
  Speaker 1: executive power to withdraw from trade agreements that the United
• 1:25
  Speaker 1: States assigned. So UM, I do think they have to
• 1:29
  Speaker 1: take him his his his threats seriously, although it's still
• 1:34
  Speaker 1: there's still a huge amount of uncertainty is exactly what
• 1:37
  Speaker 1: he intends to do, uh, Professor Lawrence, there's a lot
• 1:41
  Speaker 1: of discussion about t p P and NAFTA when we
• 1:43
  Speaker 1: talk about t p P UH, which provisions are sort
• 1:47
  Speaker 1: of most important to highly to understand what the substance
• 1:50
  Speaker 1: of this would mean and kind of how this would
• 1:52
  Speaker 1: affect specific trade relationships with specific countries. Well, t p
• 1:58
  Speaker 1: P is is now basically dead because the US is
• 2:03
  Speaker 1: not going to participate in it, UH, and there's not
• 2:07
  Speaker 1: going to be no vote UH in this Congress. But
• 2:10
  Speaker 1: the basic idea of t p P was to have
• 2:16
  Speaker 1: very deep connections and to facilitate international trade among twelve
• 2:21
  Speaker 1: twelve countries. The most important for US would have been Japan. UM.
• 2:26
  Speaker 1: There the provisions eventually would have implemented free trade in
• 2:35
  Speaker 1: goods and in many services and also facilitated investment by
• 2:40
  Speaker 1: firms by US firms abroad and foreign firms in the
• 2:44
  Speaker 1: United States. Professor I just sorry this, I just want
• 2:48
  Speaker 1: to keep focused for a second on China for just
• 2:50
  Speaker 1: a moment here, because you know, China is attending obviously
• 2:53
  Speaker 1: the Asia Pacific Economic Cooperation Summit that's taking place in
• 2:57
  Speaker 1: uh in Lima, Peru. Um, is there a chance that
• 3:01
  Speaker 1: China will become the most obvious and dominant economic power
• 3:06
  Speaker 1: when it comes to global trade because they've also moved
• 3:09
  Speaker 1: to international transactions in Yuan in Ramindi, and we've got
• 3:15
  Speaker 1: a counterweight to the World Bank and perhaps even in
• 3:17
  Speaker 1: the International Monetary Fund. Yes, So in addition to all
• 3:20
  Speaker 1: those other institutions which China has founded and is now
• 3:24
  Speaker 1: taking a leadership role, what the failure of passing TPP
• 3:29
  Speaker 1: will mean is basically that the Asian economies will be
• 3:34
  Speaker 1: increasingly relying on China for leadership in the trading system.
• 3:40
  Speaker 1: There's a lot of disenchantment with globalization in Europe and
• 3:44
  Speaker 1: we've seen Brexit and now we see it in the
• 3:46
  Speaker 1: United States, but that's not true of the Asians. And
• 3:50
  Speaker 1: many of those countries in t p p UH showed
• 3:53
  Speaker 1: a willingness to open their economies to each other and
• 3:58
  Speaker 1: they will continue I be eaves to pursue free trade agreements.
• 4:02
  Speaker 1: But now these are going to be under the aegis
• 4:05
  Speaker 1: of of China, who was originally excluded from our TPP.
• 4:11
  Speaker 1: But they've already launched a massive negotiations UH called our CEP,
• 4:17
  Speaker 1: where India, China and other Asian economies are going to
• 4:21
  Speaker 1: liberalize their trade and investment. Does that mean that they're
• 4:24
  Speaker 1: going to charge tariffs on goods coming from the US?
• 4:29
  Speaker 1: Precisely American goods. They all lower their tariffs against UH
• 4:33
  Speaker 1: their own goods, on their own goods and so, but
• 4:37
  Speaker 1: American goods are going to face higher tariffs. So when
• 4:40
  Speaker 1: we try to sell in Japan, for instance, it's likely
• 4:43
  Speaker 1: we'll have to our goods will have high tariffs on them,
• 4:47
  Speaker 1: whereas other Asian products won't have to pay the tariffs.
• 4:50
  Speaker 1: So there's some news that just came in this morning
• 4:53
  Speaker 1: that Senate Democrats elected New York Senator Chuck Schumer to
• 4:56
  Speaker 1: be a minority leader. I believe that he has been
• 5:00
  Speaker 1: prod these trade agreements. UM. Is there any chance that
• 5:05
  Speaker 1: some of the aspects of the now dead t p
• 5:07
  Speaker 1: P UH could be salvaged? Well, I I doubt it
• 5:14
  Speaker 1: because it is UH. It's a very extensive package and
• 5:19
  Speaker 1: lots of parts depended on other parts. In other words,
• 5:22
  Speaker 1: some countries made concessions in some areas, but they were
• 5:26
  Speaker 1: looking for concessions reciprocally, and I think a lot of
• 5:31
  Speaker 1: them were motivated by uh improved entry into the US marketplace.
• 5:37
  Speaker 1: And so we drove that negotiation. It's going to be
• 5:40
  Speaker 1: very difficult, I think, just to take to pick and
• 5:43
  Speaker 1: choose certain parts of the agreement. Robert Lawrence, would you
• 5:47
  Speaker 1: say that there's going to be a trade war between
• 5:49
  Speaker 1: the United States and other countries? Well, I I think
• 5:54
  Speaker 1: before we get to the war, what we're going to
• 5:57
  Speaker 1: have is a huge amount of uncertainty. You know, we
• 6:00
  Speaker 1: have our economy, say, and the Mexican economy are intertwined products. UH,
• 6:06
  Speaker 1: final products are made up of components from both sides
• 6:10
  Speaker 1: of the border, and if you affirm on either side
• 6:14
  Speaker 1: of the border, you have a great deal uncertainty as
• 6:17
  Speaker 1: to what are the rules of the game going to be.
• 6:19
  Speaker 1: And the result is we're going to see a depression
• 6:22
  Speaker 1: in investments on both sides of the border. So I
• 6:27
  Speaker 1: think it's so that's the first phase is going to
• 6:29
  Speaker 1: be a huge amount of uncertainty if we do enter
• 6:32
  Speaker 1: into negotiations. UH, it's possible that we could withdraw from
• 6:38
  Speaker 1: from NAFTA, we would raise tariffs on Mexican products. They
• 6:42
  Speaker 1: would raise tariffs on our products. Now, ironically, the PASO
• 6:48
  Speaker 1: is weakened considerably, So actually the greatest manipulator of exchange
• 6:53
  Speaker 1: rates today. The process that's weakening foreign currencies and strengthening
• 6:58
  Speaker 1: the US dollar are the prospect of of of of
• 7:02
  Speaker 1: a trade war. So if China does sort of take
• 7:05
  Speaker 1: the lead in Asia and there is more free trade
• 7:09
  Speaker 1: in that region, how big of a hit could the U. S.
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  Speaker 1: Economy take as a result. Well, I think it could be.
• 7:17
  Speaker 1: It could be very damaging. There are estimates, you know,
• 7:20
  Speaker 1: it's it's the trade WARUM requires a lot of imagination.
• 7:25
  Speaker 1: How what do we what measures do we take? What
• 7:28
  Speaker 1: measures do they take. I think there's just a fundamental
• 7:32
  Speaker 1: lack of appreciation of the degree as I said, to
• 7:34
  Speaker 1: which we have, UH, we're part of global supply chains.
• 7:38
  Speaker 1: Two thirds of all of our imports are not finished products,
• 7:42
  Speaker 1: and so when we impose tariffs on those imports, we're
• 7:45
  Speaker 1: going to hurt production in the United States. So I
• 7:48
  Speaker 1: think there will be a hit from that. UM In general,
• 7:52
  Speaker 1: what people are looking at is a weakening of the U. S.
• 7:56
  Speaker 1: Economy from the trade side, with a hope that the
• 7:59
  Speaker 1: infrastruct just spending on the tax cuts will upset them.
• 8:02
  Speaker 1: Robert Lawrence, thank you so much for being with us.
• 8:04
  Speaker 1: Robert Lawrence, Professor of International Trade and Investment at the
• 8:07
  Speaker 1: JFK School of Government at Harvard University. This is Bloomberg,
• 8:25
  Speaker 1: or let's turn our attention now to the oil industry.
• 8:28
  Speaker 1: NIMEX crude is up about a half a percent right now.
• 8:31
  Speaker 1: Taking a look at oil, We've got Javier Blass. He
• 8:33
  Speaker 1: is the chief energy correspondent for Bloomberg and he joins
• 8:37
  Speaker 1: us from London. Javier, thank you very much for being
• 8:40
  Speaker 1: with us. Tell us a little bit about the context
• 8:43
  Speaker 1: of oil trading right now. Is everyone waiting for that
• 8:45
  Speaker 1: OPEC meeting. Everyone is waiting for the OPEC meeting November,
• 8:50
  Speaker 1: but also looking at the diplomatic activity that the Oil
• 8:54
  Speaker 1: Group is a display in this week, We're going to
• 8:57
  Speaker 1: have several oil ministers, including the minister from Saudi Arabia
• 9:01
  Speaker 1: in event in Doha, Qatar, having informal discussions ahead of
• 9:06
  Speaker 1: that meeting. And what we are gathering now is a
• 9:09
  Speaker 1: big effort over the last three days and continuing over
• 9:13
  Speaker 1: the next ten days to try to reach an agreement.
• 9:16
  Speaker 1: Really seems that OPEC is trying hard to get all
• 9:20
  Speaker 1: the ministers talking to each other and trying to breage
• 9:23
  Speaker 1: the differences, but they're still as we are today. There
• 9:26
  Speaker 1: is no deal to reduce production and try to increase prices.
• 9:30
  Speaker 1: How has Donald trump selection as the next US president
• 9:33
  Speaker 1: affected the dynamic here? I mean he said some some
• 9:37
  Speaker 1: some negative things about the US agreement with Iran and
• 9:40
  Speaker 1: and possibly has raised the spector of further sanctions. I mean,
• 9:44
  Speaker 1: does this Does this play into the negotiations at all?
• 9:46
  Speaker 1: I think that they plays at least on this on
• 9:48
  Speaker 1: the psychological background of the negotiations. For sure, the Iranian
• 9:52
  Speaker 1: negotiation is going to be thinking what he's gonna be
• 9:54
  Speaker 1: coming next year in terms of oil oil sanstions from
• 9:57
  Speaker 1: the United States, and whether the hand is weaker or
• 10:00
  Speaker 1: stronger with Trump in in the White House. I have
• 10:03
  Speaker 1: been talking to traders. There are many different views about
• 10:06
  Speaker 1: what this could make for the Iranians, for the Iranian
• 10:09
  Speaker 1: negotiation position, but certainly it looks like more oil coming
• 10:13
  Speaker 1: from Iraq is going to be more difficult next year.
• 10:16
  Speaker 1: But also the other big problem for OPEC is that
• 10:18
  Speaker 1: Trump has talked about US oil independence a big support
• 10:23
  Speaker 1: for the domestic oil industry and that could be a
• 10:26
  Speaker 1: source of competition for OPEC. So you are OPEC, you
• 10:29
  Speaker 1: can think, now do we cut production, increased prices juice
• 10:34
  Speaker 1: as a new president which friendlier to the domestic US
• 10:37
  Speaker 1: industry is coming, because what you could do is basically
• 10:41
  Speaker 1: bankroll the shale producers in the United States. So certainly
• 10:46
  Speaker 1: it changed completely the dynamics within OPEC, both internal negotiations
• 10:50
  Speaker 1: and relationship between Iran and Saudi Arabia, but also the
• 10:54
  Speaker 1: view of the group of what is happening in the
• 10:56
  Speaker 1: United States. Well, have you let's stay in the United
• 10:58
  Speaker 1: States for just a moment and give us your thoughts
• 11:02
  Speaker 1: on increased activity in construction of pipelines, for example the
• 11:05
  Speaker 1: Keystone Excel pipeline. Well, we're probably are gonna see the
• 11:10
  Speaker 1: new the president elect Donald Trump green line new pipelines.
• 11:14
  Speaker 1: That could mean more Canadian crude oil coming into the
• 11:18
  Speaker 1: market in the next few years. Uh E couldming also
• 11:22
  Speaker 1: that US shell producers enjoy better prices because they can
• 11:26
  Speaker 1: easily sell their crude oil without having to rely on
• 11:30
  Speaker 1: trains and tracks to move the crude. So in general,
• 11:33
  Speaker 1: more pipelines and a presidency of Donald Trump means higher
• 11:37
  Speaker 1: production from Canada, higher production from the United States. But
• 11:41
  Speaker 1: this will take time. A pipeline doesn't build overnight, and
• 11:44
  Speaker 1: a production decisions are not make overnight. So we're talking
• 11:48
  Speaker 1: about probably twenty eighteen the earliest where we're going to
• 11:51
  Speaker 1: see impact, and probably is more a question of two
• 11:53
  Speaker 1: thousand and nineteen. So we're talking about the supply side.
• 11:57
  Speaker 1: What about the demand side. I mean, it seems like
• 11:59
  Speaker 1: people are thinking that perhaps demand for oil will increase
• 12:03
  Speaker 1: as there is less emphasis on environmental regulations and carbon caps.
• 12:08
  Speaker 1: It could be very well be the case for the
• 12:10
  Speaker 1: United States, but also Donald Trump presidency, particularly some of
• 12:15
  Speaker 1: his promises on trade come through our particularly negative for China,
• 12:20
  Speaker 1: India and other American countries. Those are the countries that
• 12:23
  Speaker 1: they're the real engine of global oil demand. That's that's
• 12:26
  Speaker 1: where drivers are buying new cars, that's where motorcycles have
• 12:30
  Speaker 1: been added to the two the roads every day. So
• 12:33
  Speaker 1: if it's a Trump presidency means a lower economic growth
• 12:37
  Speaker 1: in American countries in general, that's very negative for oil
• 12:40
  Speaker 1: for oil demand, Yes, there will be a positive in
• 12:43
  Speaker 1: the United States that probably less regulation could mean a
• 12:47
  Speaker 1: healthier or a more stronger increase in oil demand, but
• 12:51
  Speaker 1: certainly China and India are the big, the big, the
• 12:53
  Speaker 1: big warriors here. Howevier could this also be reflected in
• 12:57
  Speaker 1: changes to the standards for miles per for US automakers,
• 13:01
  Speaker 1: if indeed they are at least repealed or health current levels.
• 13:06
  Speaker 1: Will that affect people's driving habits and therefore the use
• 13:10
  Speaker 1: of gasoline? It could be very well. And what we
• 13:12
  Speaker 1: have seen already is that the lowest gasoline prices in
• 13:16
  Speaker 1: the United States in twelve years this driving season during
• 13:19
  Speaker 1: the summer holidays, US drivers enjoyed the lowest prices have
• 13:24
  Speaker 1: to go back to the early two thousands to find
• 13:27
  Speaker 1: lower prices. That is meaning that actually the drivers are
• 13:30
  Speaker 1: buying a lot of larger cars. UH. The share of
• 13:34
  Speaker 1: s ubs in total sales of passenger cars have increased
• 13:37
  Speaker 1: to about sixty that is contrary to what the government
• 13:41
  Speaker 1: was predicting that it was more or less around forty percent.
• 13:44
  Speaker 1: So the decisions that the U S consumers are already
• 13:47
  Speaker 1: taking are moving us into that direction of larger cars,
• 13:51
  Speaker 1: and even the subs of today a lot a lot
• 13:54
  Speaker 1: more efficient that they were ten years ago. That's meaning
• 13:57
  Speaker 1: that the MPG rate, it's outlining and he's actually decreasing
• 14:02
  Speaker 1: contrary to what the Obama administration was trying to achieve.
• 14:05
  Speaker 1: Xavier Blast, thank you so much for joining us. Have
• 14:08
  Speaker 1: your Blast chief Energy correspondent for b London for Bloomberg
• 14:13
  Speaker 1: coming to us from London. All right, we want Lowell
• 14:28
  Speaker 1: euro to put his knowledge to work. He is the
• 14:30
  Speaker 1: head of multi Asset Solutions at b MO Global Asset Management,
• 14:35
  Speaker 1: where he helps oversee two hundred and thirty three billion
• 14:40
  Speaker 1: dollars BEMO, you're the name, you're the word. All right,
• 14:44
  Speaker 1: little tell us. Have you told clients they should change
• 14:48
  Speaker 1: anything in their investment allocation? No, we haven't. In fact,
• 14:54
  Speaker 1: we're looking at an environment that is very well set
• 14:58
  Speaker 1: up for further upside and equity, particularly UH in the US.
• 15:03
  Speaker 1: The one area that we've been very cautious about, and
• 15:06
  Speaker 1: the one area that this election in the US has
• 15:09
  Speaker 1: UH taken folks eyes off the ball on is with
• 15:14
  Speaker 1: what's going on in Europe. And so we've all been
• 15:16
  Speaker 1: focused on the US election, and what we've been ignoring
• 15:19
  Speaker 1: and we think are potentially bigger risks are the elections
• 15:23
  Speaker 1: going on in Europe, and starting with the Italian referendum,
• 15:25
  Speaker 1: in December. Then moving into the first quarter, you've got
• 15:28
  Speaker 1: the Dutch elections, the French election, and the big election
• 15:31
  Speaker 1: next year. To watch is what goes on with Angela
• 15:34
  Speaker 1: Merkel in Germany, and those could rewrite the playbook in Europe.
• 15:37
  Speaker 1: I want I want to get to Europe in a second,
• 15:40
  Speaker 1: but I wanna just press you a little bit on
• 15:42
  Speaker 1: what you're talking about with stocks, particularly US stocks. One
• 15:46
  Speaker 1: of the big argument for why stocks were rallying is
• 15:49
  Speaker 1: that bond deals were so low and benchmark rates were
• 15:52
  Speaker 1: so low, uh that there was no alternative. People were
• 15:55
  Speaker 1: going into stocks for dividends, and they were considering them
• 15:57
  Speaker 1: a proxy almost for bonds, because at least you were
• 16:00
  Speaker 1: getting more income from the dividends than you were from
• 16:03
  Speaker 1: uh some benchmark bonds. That's going away as bond yields rise.
• 16:08
  Speaker 1: Isn't that going to be a big effect. We don't
• 16:11
  Speaker 1: think so. Um. If you look at just the fundamentals
• 16:14
  Speaker 1: and evaluations, you know, you could argue that US equities
• 16:17
  Speaker 1: are a bit expensive, but history would show us that
• 16:20
  Speaker 1: at the levels they're trading at today, historically you still
• 16:23
  Speaker 1: get pretty decent returns out of equities. Now we might
• 16:26
  Speaker 1: not be talking about the nine returns that investors have
• 16:30
  Speaker 1: been used over the last thirty years. But a five
• 16:32
  Speaker 1: to six percent return out of equity should be very
• 16:35
  Speaker 1: good in the context of low BONN yields still and
• 16:39
  Speaker 1: potentially higher bonields moving higher. Could you just explain you
• 16:43
  Speaker 1: said earlier that you think that stocks are poised for
• 16:46
  Speaker 1: another leg up. Why is that, Well, you've got a
• 16:50
  Speaker 1: couple of things. You've got a environment that is going
• 16:55
  Speaker 1: to be UM supportive of growth. So some of the
• 17:00
  Speaker 1: policies that are trickling to the top that are that
• 17:03
  Speaker 1: Obama Trump is focusing on, uh, that are supportive to
• 17:07
  Speaker 1: growth are the tax policy, less regulation UM, and greater
• 17:13
  Speaker 1: fiscal spending. And those are very strong supporters to potentially
• 17:17
  Speaker 1: top line growth, which has been missing throughout this entire recovery.
• 17:21
  Speaker 1: So those are really good drivers of further growth. UM.
• 17:25
  Speaker 1: So let's let's go Let's go back now to what
• 17:27
  Speaker 1: you're talking about with Europe, because uh, certainly within the
• 17:30
  Speaker 1: bond world, we're hearing a lot of concern about Italy
• 17:32
  Speaker 1: and you're seeing yields on Italian and Portuguese bonds rise
• 17:36
  Speaker 1: considerably just in preparation for what is to come. How
• 17:41
  Speaker 1: will investors in the US feel the effects of some
• 17:45
  Speaker 1: of these elections. If say, uh, the Italian voters do
• 17:49
  Speaker 1: vote no on the referendum, or you know, if on
• 17:51
  Speaker 1: glammercal is not anymore the president or the the head
• 17:56
  Speaker 1: of Germany, Well you don't have to look too far
• 17:59
  Speaker 1: back to get an sense as to how problems in
• 18:02
  Speaker 1: Europe have manifested in US equity. So go back to
• 18:06
  Speaker 1: the summers of two thou thirteen, go back to the
• 18:08
  Speaker 1: summers where we debated about what was going to happen
• 18:12
  Speaker 1: with Greece. So specific to the Italian elections, You've got
• 18:15
  Speaker 1: a situation here with a lot of the progress have
• 18:18
  Speaker 1: been made with fixing the Italian banks gets thrown and
• 18:21
  Speaker 1: turned on its head, and that could put further scare
• 18:24
  Speaker 1: into the election elements earlier coming up. And you might
• 18:28
  Speaker 1: have this situation where the euro which many have been
• 18:33
  Speaker 1: calling and we might agree under this march that we're
• 18:36
  Speaker 1: taking here from these elections, really gets called into question.
• 18:40
  Speaker 1: It's a sustainability of euro and the unwinding of that
• 18:42
  Speaker 1: will cause chaos that will be definitely felt in the
• 18:45
  Speaker 1: United States. Well, well, you know, I was just to
• 18:48
  Speaker 1: take your three points right regulation you say, okay, a
• 18:51
  Speaker 1: rollback of regulations. Well, if those regulations were put in
• 18:55
  Speaker 1: place after the debacle of two thousand eight two thousand
• 18:59
  Speaker 1: uh two recession, you could argue that not having those
• 19:04
  Speaker 1: regulations may have contributed to that debacle. Plus, you talk
• 19:08
  Speaker 1: about tax policy, there's no real indication about where the
• 19:14
  Speaker 1: extra revenue is going to come from in order to
• 19:16
  Speaker 1: pay for any of this. And then you said stimulus
• 19:18
  Speaker 1: that kind of combines with tax policy. How are we
• 19:21
  Speaker 1: going to afford this? Yeah, And I think that's where
• 19:24
  Speaker 1: I think we need to watch where um the potential
• 19:28
  Speaker 1: for threatening the needle, where you can provide enough infrastructure
• 19:33
  Speaker 1: spending without alienating the far right Tea Party folks that
• 19:38
  Speaker 1: have been, you know, advocating for balanced budgets and on
• 19:41
  Speaker 1: what every mind. Then the bond vigilantes, right, people in
• 19:44
  Speaker 1: the bond market. We saw that just recently bond yields increasing.
• 19:49
  Speaker 1: People don't want to hold those bonds. Well, certain people
• 19:52
  Speaker 1: don't want to hold the bonds. Don't forget how many
• 19:55
  Speaker 1: investors want to hold US treasuries. So you've got foreign
• 19:58
  Speaker 1: buyers of treasuries that look at these yields and say
• 20:00
  Speaker 1: they're very attractive you've got pension plans that have been
• 20:04
  Speaker 1: waiting for years for yields to move up so they
• 20:07
  Speaker 1: can immunize their liabilities. And so you've got a lot
• 20:09
  Speaker 1: of buyers that will naturally come into the market as
• 20:13
  Speaker 1: yields go higher. Hurts stocks, not necessarily because they're not
• 20:18
  Speaker 1: rotating necessarily massively out of stocks. Although you know what
• 20:21
  Speaker 1: you were talking about in Europe, should the euro unravel,
• 20:24
  Speaker 1: the dollar will become even more of a haven trade,
• 20:27
  Speaker 1: right perhaps you know, I think you know, as we've
• 20:31
  Speaker 1: seen in this situation, the yend is becoming the safe
• 20:34
  Speaker 1: haven trade, and potentially the swissy becomes the safe haven trade.
• 20:37
  Speaker 1: But but by my point being that this could even
• 20:40
  Speaker 1: support another leg up in the dollar, you know, strengthening
• 20:44
  Speaker 1: against other comfortable currencies, and couldn't that slow growth and
• 20:48
  Speaker 1: sort of add a drag effect to US stocks. It could,
• 20:52
  Speaker 1: But let's look back at periods where we've had a
• 20:54
  Speaker 1: strong dollar before we're stocked have done very very well.
• 20:58
  Speaker 1: So if you go back to the ninety nine in use,
• 21:00
  Speaker 1: where the dollar had this regime change and a large
• 21:02
  Speaker 1: move up, U S equities outperformed non US equities significantly,
• 21:06
  Speaker 1: and so we don't want to get two caught into
• 21:10
  Speaker 1: these you know rules of thumb where a strong dollar
• 21:12
  Speaker 1: is all of a sudden bad for stocks. If you
• 21:15
  Speaker 1: have a strong dollar with growth and potential wild card
• 21:19
  Speaker 1: up potentially productivity games, this could be a very good
• 21:22
  Speaker 1: environment for stocks. I have to wait and see what happens, right,
• 21:26
  Speaker 1: I mean, that's the key thing. But you say right now,
• 21:28
  Speaker 1: no change, don't don't, don't do anything drastic to your portfolio.
• 21:31
  Speaker 1: Don't change your asset allocation, and you're You're in good company.
• 21:34
  Speaker 1: A lot of people are saying the same thing. It's
• 21:36
  Speaker 1: hard to sort of make concrete moves based on a
• 21:38
  Speaker 1: lot of speculation. Lower Euro head of multi Asset Solutions
• 21:42
  Speaker 1: at b MO Global Asset Management, which oversees two dty
• 21:46
  Speaker 1: three billion dollars. Luckily, he is in Chicago and can
• 21:48
  Speaker 1: avoid the gridlock that we are seeing in Midtown Manhattan
• 21:51
  Speaker 1: around the Trump Tower. So we wish you a safe
• 21:53
  Speaker 1: travels back to Chicago. We are starting to have a
• 22:07
  Speaker 1: sense of what we can imagine from uh. The Senate.
• 22:11
  Speaker 1: Senate Republicans re elected Mitch McConnell of Kentucky on Wednesday
• 22:14
  Speaker 1: to be a majority leader next year. Also, the Democrats
• 22:17
  Speaker 1: UH selected Chuck Schumer, a New York's state Democrat, to
• 22:22
  Speaker 1: be the most powerful Democrat in the Senate. Um, I
• 22:26
  Speaker 1: want to bring in Mark Niquette of Bloomberg Politics team
• 22:31
  Speaker 1: here and Mark, what are these appointments? Tell us about
• 22:35
  Speaker 1: the direction? Is anything surprising, particularly with Chuck Schumer's UH
• 22:39
  Speaker 1: coming in and replacing the former leadership. No, I think
• 22:43
  Speaker 1: that's sort of what was expected to happen. You know,
• 22:45
  Speaker 1: certainly we thought the Republican leadership wouldn't change, and you
• 22:49
  Speaker 1: know there were signs, you know, with Harry read leaving
• 22:51
  Speaker 1: that Chuck Schumer was a mind to become minority leader
• 22:54
  Speaker 1: and majority leader actually if the Democrats had managed to
• 22:56
  Speaker 1: take control of the Senate during the elections. Mark, tell
• 23:00
  Speaker 1: us a little bit about who is vying for various
• 23:03
  Speaker 1: spots in a Trump administration. Well, we're here all kinds
• 23:07
  Speaker 1: of names being floated about, and maybe one of the
• 23:09
  Speaker 1: most interesting ones is Ted Cruz, the Texas senator who
• 23:12
  Speaker 1: competed hard, obviously for the presidential nomination against Trump. And
• 23:16
  Speaker 1: you know, um, you know, with with Trump, you know,
• 23:18
  Speaker 1: calling him lying Ted constantly, and you know Cruz um
• 23:22
  Speaker 1: with the last day UH of his campaign actually was
• 23:25
  Speaker 1: was Indiana and I was there, and he essentially had
• 23:27
  Speaker 1: this press conference where he you know, claimed that he would,
• 23:30
  Speaker 1: you know, the civilization as we know it would end
• 23:32
  Speaker 1: if they nominated Trump and about never to support him.
• 23:35
  Speaker 1: Will Now he's being considered, we're told, for attorney general possibly,
• 23:39
  Speaker 1: and his name has also been thrown out as a
• 23:40
  Speaker 1: potential Supreme Court appointment. So we're seeing a lot of
• 23:43
  Speaker 1: people sort of you know, work their way through Trump
• 23:45
  Speaker 1: Tower during this vetting processes of deciding on names, and
• 23:49
  Speaker 1: you know, it's a little unclear at this point who's
• 23:50
  Speaker 1: actually being seriously considered and who's just being sort of
• 23:53
  Speaker 1: trotted out there in front of the reporters. Um Mark,
• 23:56
  Speaker 1: you know, ford a bunch of stories about sort of
• 23:59
  Speaker 1: the push pull between people who are saying, uh, we're
• 24:03
  Speaker 1: established people in Washington, d C. And we don't want
• 24:06
  Speaker 1: to serve in the Trump administration and others saying we're
• 24:08
  Speaker 1: established people in in DC and we think it's important
• 24:11
  Speaker 1: to serve in the Trump as administration administration regardless of
• 24:14
  Speaker 1: what we think about um some of what he said
• 24:17
  Speaker 1: on the campaign trail, what do you hear from people
• 24:20
  Speaker 1: as far as the vast majority of people who are
• 24:23
  Speaker 1: longtime Washington operatives, and whether or not they're willing to serve, Well,
• 24:28
  Speaker 1: there's sometimes there's just a fundamental um um, you know,
• 24:33
  Speaker 1: put contention between wanting to have a job and you know,
• 24:36
  Speaker 1: be involved in the administration and sort of the principles.
• 24:40
  Speaker 1: You know, like you said of maybe in the past
• 24:41
  Speaker 1: saying you would never serve whether Trump or you can't fathom,
• 24:44
  Speaker 1: you know, some of his policies. So I think what
• 24:46
  Speaker 1: we're seeing going on, frankly, is you know some folks
• 24:49
  Speaker 1: thinking about, well, do I want to be have a
• 24:51
  Speaker 1: seat at the table with this new administration, even if
• 24:54
  Speaker 1: I have reservations or are my objections to the policies
• 24:58
  Speaker 1: or the proposals or the you know, the presidency itself
• 25:01
  Speaker 1: of Donald Trump just so disqualifying. I can't even consider
• 25:04
  Speaker 1: consider serving. Mark. Is it a foregone conclusion that Republicans
• 25:09
  Speaker 1: will rubber stamp whatever Donald Trump wants in terms of
• 25:15
  Speaker 1: people and policies, Not at all. Just like we're sort
• 25:18
  Speaker 1: of un sure and certain about you know, who Donald
• 25:21
  Speaker 1: Trump will actually end up appointing to some of these
• 25:23
  Speaker 1: key positions. You know, there's no, it's not a foregone conclusion.
• 25:26
  Speaker 1: They'll all get a smooth sale and through confirmation in
• 25:28
  Speaker 1: the Senate um. You know, the the margin is still
• 25:31
  Speaker 1: pretty narrow. Republicans only have a edge in UM control
• 25:37
  Speaker 1: of the Senate. And you know, you know, assume the Democrats,
• 25:40
  Speaker 1: you know, don't go along. We don't know exactly how
• 25:42
  Speaker 1: they're going to play all these individual appointments. We have
• 25:45
  Speaker 1: Republicans who have not been enamored of Trump and you know,
• 25:47
  Speaker 1: have a right opposed him during the primary, the nominating
• 25:51
  Speaker 1: process UM and have already been on record UM saying
• 25:54
  Speaker 1: they might not support some of the names that are
• 25:56
  Speaker 1: being floated. Ran Paul for example, the Kentucky Center said
• 26:00
  Speaker 1: that if you know, former Ambassador John Bolton or former
• 26:03
  Speaker 1: New York mayor Rudy Giuliani get tapped as Secretary of State,
• 26:06
  Speaker 1: you know he can't go along with that. So the
• 26:07
  Speaker 1: question will be how much how united are both the
• 26:10
  Speaker 1: Republicans and the Democrats on various appointments. And you know,
• 26:14
  Speaker 1: if we see, you know, the willingness of either Democrats
• 26:17
  Speaker 1: to break ranks or you know, Republicans you just can't
• 26:19
  Speaker 1: go along, we might have some some nasty fights for confirmation.
• 26:23
  Speaker 1: So at this point, I mean normally when a new
• 26:26
  Speaker 1: president elect starts preparing for his administration. Are there basic
• 26:32
  Speaker 1: sort of mundane aspects of how the government operates that
• 26:37
  Speaker 1: he needs to get in order before he uh takes
• 26:40
  Speaker 1: the oath in January? Yes, and there's also certain sort
• 26:43
  Speaker 1: of you know key you know, almost routine UM procedures
• 26:47
  Speaker 1: for the transfer of power. You know, for example, there's
• 26:51
  Speaker 1: a non disclosure agreement that the incoming folks and the
• 26:55
  Speaker 1: current administration signed just so that the inner workings of
• 26:58
  Speaker 1: government aren't exposed. Well, in form nation is being shared
• 27:01
  Speaker 1: to the incoming administration and teams are being put together
• 27:04
  Speaker 1: what we're told that was not signed until last night,
• 27:07
  Speaker 1: essentially that you know, we had to shake up in
• 27:10
  Speaker 1: the transition team for Donald Trump or Chris Christie was
• 27:12
  Speaker 1: shown the door in in UH on Friday and Mike
• 27:15
  Speaker 1: Pence came in while apparently nobody signed this letter until
• 27:19
  Speaker 1: yesterday with Mike Pence heading the transition. So consequently we
• 27:22
  Speaker 1: lost you know, three or four days there where information
• 27:25
  Speaker 1: was not shared from the administration side to the incoming
• 27:28
  Speaker 1: Trump teams looking at key areas like foreign um relations
• 27:32
  Speaker 1: and you know, even internal agency type information. UM. So
• 27:37
  Speaker 1: it's been you know, probably the most charitable word to
• 27:40
  Speaker 1: describe the transition so far has been chaotic. Thanks for
• 27:48
  Speaker 1: listening to the Bloomberg P and L podcast. You can
• 27:51
  Speaker 1: subscribe and listen to interviews at iTunes, SoundCloud, or whatever
• 27:55
  Speaker 1: podcast platform you prefer. I'm Pim Fox. I'm out there
• 27:59
  Speaker 1: on Twitter at Tim Fox. I'm out there on Twitter
• 28:02
  Speaker 1: at Lisa Abramo. It's one before the podcast. You can
• 28:05
  Speaker 1: always catch us worldwide on Bloomberg Radio