Latest / Bloomberg Intelligence / Job Creation Should Be Required for Corporate Tax Cuts, Macke Says

Transcript

Job Creation Should Be Required for Corporate Tax Cuts, Macke Says · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m 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
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Right now,
• 0:32
  Speaker 1: we've got Justin Sink also out of our DC bureau,
• 0:36
  Speaker 1: and Justin you're covering the president and you know, we've
• 0:40
  Speaker 1: talked to us briefly about his planned trip to Puerto Rico.
• 0:43
  Speaker 1: When he gets there, he's not is he gonna find
• 0:46
  Speaker 1: any love? Well, I think that's a big question. Obviously,
• 0:51
  Speaker 1: the White House is depicted. Um, the response to the
• 0:53
  Speaker 1: storm is more than adequate, they've said, you know, they
• 0:57
  Speaker 1: think that, Uh, it's been a kind of unprecedented response
• 1:01
  Speaker 1: in terms of military personnel and getting supplies down there.
• 1:05
  Speaker 1: We've seen a lot of stories from the ground that
• 1:07
  Speaker 1: suggests that and heard from the mayor of San Juan
• 1:10
  Speaker 1: to suggest that there's a lot of frustration the things
• 1:13
  Speaker 1: still aren't great there, that food and water aren't getting
• 1:16
  Speaker 1: to people that need it. That power is still not
• 1:18
  Speaker 1: on and so uh we are. I think that's going
• 1:22
  Speaker 1: to be the big question coming out of tomorrow is
• 1:25
  Speaker 1: what kind of reception he receives um and how far
• 1:28
  Speaker 1: he goes. It's possible that the president schedule just leaves
• 1:31
  Speaker 1: him kind of on a military base where he's unlikely
• 1:33
  Speaker 1: to face some of the criticism. But if he does
• 1:35
  Speaker 1: decide to go out some of the more storm ravaged areas,
• 1:40
  Speaker 1: it's a real question of how people are going to respond,
• 1:42
  Speaker 1: you know. Justin I'm really struck by the normal playbook
• 1:46
  Speaker 1: that we normally have when there are tragedies. And this
• 1:48
  Speaker 1: of course is relevant to the comments that we are
• 1:50
  Speaker 1: waiting from President Trump imminently about the Las Vegas shooting. Normally,
• 1:55
  Speaker 1: presidents come out and they say, oh, what a horrible catastrophe.
• 1:59
  Speaker 1: We will do everything in our power to make things
• 2:02
  Speaker 1: as better as we can for the surviving victims. Whether
• 2:05
  Speaker 1: it's in Puerto Rico, we have, you know, doubling down
• 2:07
  Speaker 1: all of our efforts. Our line is open, call us.
• 2:11
  Speaker 1: We want to hear from you. We want to figure
• 2:13
  Speaker 1: out how to go go forward in a better and
• 2:16
  Speaker 1: bigger way go you know, in the future. This is
• 2:19
  Speaker 1: this is so out of the norm to basically try
• 2:23
  Speaker 1: to attack people and spin the picture in the process.
• 2:28
  Speaker 1: Am I wrong? No? I think I think you're right.
• 2:30
  Speaker 1: The presidents of both parties have really tried to play
• 2:34
  Speaker 1: that consoler in chief role, you know, um, in the
• 2:37
  Speaker 1: light of tragedy, whether it's President Bush going down to
• 2:40
  Speaker 1: Katrina after We're going down to New Orleans after Katrina
• 2:44
  Speaker 1: and Jack Parking and trying to harness that moment, even
• 2:48
  Speaker 1: though obviously I think um it ended up being a
• 2:52
  Speaker 1: situation the damage is presidency. Uh. You mentioned Las Vegas,
• 2:56
  Speaker 1: and I think some of the most memorable moments President
• 2:58
  Speaker 1: Obama's term were has response him actually in events the
• 3:02
  Speaker 1: church and Charleston being maybe at the top of that list.
• 3:06
  Speaker 1: And Uh, it's not a role that that President Trump
• 3:09
  Speaker 1: has really had to confront until the last couple of weeks,
• 3:14
  Speaker 1: and it's one where he seems a little uncomfortable. I
• 3:17
  Speaker 1: think that this is um, somebody who is throughout his
• 3:21
  Speaker 1: political career found um some of the most success in
• 3:25
  Speaker 1: in rallying his core supporters and outraging UM some of
• 3:30
  Speaker 1: his critics. And and that's an approach that is different
• 3:35
  Speaker 1: from what many presidents have taken. At times where you
• 3:38
  Speaker 1: might see them try to, I think, bring together a
• 3:41
  Speaker 1: national unity. And so it might be a reflection of
• 3:44
  Speaker 1: Donald Trump, of a changing political climate, of different expectations
• 3:48
  Speaker 1: among Americans. But it's going to be very interesting to
• 3:50
  Speaker 1: see how he tried to navigate the speech coming up
• 3:54
  Speaker 1: in a couple of minutes. But also, uh, is that
• 3:57
  Speaker 1: it's Puerto Rico tomorrow. So justin just sticking Puerto Rico,
• 4:00
  Speaker 1: I'm trying to get a sense of just how much
• 4:02
  Speaker 1: of a humanitarian disaster it is and where the US
• 4:06
  Speaker 1: troops and other first responders are in in uh, in
• 4:10
  Speaker 1: dealing with what's going on. I mean power has been
• 4:12
  Speaker 1: restored to a lot of people, right, I mean are
• 4:15
  Speaker 1: we out of the danger zone? I don't think we're
• 4:17
  Speaker 1: quite out of the danger zone yet. And the reason
• 4:19
  Speaker 1: that I say that is that, well, you know, there
• 4:21
  Speaker 1: has been measurable progress throughout much of the island. There
• 4:24
  Speaker 1: are still hospitals that aren't fully online. Um, there are
• 4:28
  Speaker 1: still remote areas of Puerto Rico where we don't have
• 4:32
  Speaker 1: great visibility into both what has already happened and the
• 4:36
  Speaker 1: current status. Uh. But things are getting better uh day
• 4:41
  Speaker 1: to day. And so I think one of the big
• 4:44
  Speaker 1: kind of outstanding questions is what is the extent of
• 4:47
  Speaker 1: the damage since we don't have full communications, since we
• 4:50
  Speaker 1: haven't been able to clear all the roads and get
• 4:53
  Speaker 1: to everywhere. Um, you know, we have a sense of
• 4:56
  Speaker 1: the major population centers starting to it into recovery mode,
• 5:01
  Speaker 1: but I think especially in remote rural areas and areas
• 5:04
  Speaker 1: where communications continue to be a real issue. UM, we
• 5:09
  Speaker 1: just don't have a size or or scope of of
• 5:13
  Speaker 1: what this sort of damage is yet. You know, justin
• 5:16
  Speaker 1: I'm struck by the notion that there may be a
• 5:19
  Speaker 1: connection between the damage that the commonwealth faces and economic
• 5:25
  Speaker 1: decisions that were made years hence in the sense that
• 5:29
  Speaker 1: you know, if you're not able to continually upgrade and
• 5:32
  Speaker 1: strengthen and bolster your infrastructure and to take account of
• 5:37
  Speaker 1: new information such as weather patterns and so on, Uh,
• 5:42
  Speaker 1: then you're faced with what the what has happened in
• 5:45
  Speaker 1: Puerto Rico. Is there any way that in the rebuilding
• 5:49
  Speaker 1: that takes place, it can be framed in such a
• 5:52
  Speaker 1: way that it would actually lead to something positive for
• 5:56
  Speaker 1: the future not only of the island itself, but of
• 5:59
  Speaker 1: the way the economy works. Yeah, So I think there's
• 6:02
  Speaker 1: two elements. This one is the sort of rebuilding of
• 6:05
  Speaker 1: the infrastructure on the island, and something that Trump administration
• 6:08
  Speaker 1: officials are really emphasized as they are sort of rebuilding
• 6:13
  Speaker 1: the power grid, which is going to be a huge
• 6:14
  Speaker 1: undertaking UM. As they're rebuilding utility services like the sort
• 6:20
  Speaker 1: of water and sewage systems, they're going to try to
• 6:23
  Speaker 1: future proof those in a way that UM makes them
• 6:26
  Speaker 1: less susceptible to the type of damage that we saw
• 6:29
  Speaker 1: the after method that's hurricane. So that's going to be
• 6:32
  Speaker 1: hopefully positive for the people of Puerto Rico as they
• 6:36
  Speaker 1: confront future tropical storms. UH. The second part of this
• 6:40
  Speaker 1: is the trickier part, which is that there's still tens
• 6:43
  Speaker 1: of billions of dollars of debt that hangs over the
• 6:46
  Speaker 1: island's government and that's the problem that's only going to
• 6:48
  Speaker 1: get worse as they try to grapple with UM an
• 6:52
  Speaker 1: economy that's going to be as devastated as everything else
• 6:56
  Speaker 1: on the island. UM. So a big outstanding question is
• 6:59
  Speaker 1: whether cong steps in and provides any sort of bailout
• 7:04
  Speaker 1: to help the island UM get from under that you know,
• 7:08
  Speaker 1: economic news that has really prevented them from doing the
• 7:11
  Speaker 1: sort of maintenance and upgrades that that we've seen in
• 7:14
  Speaker 1: other states. So far, we haven't seen a big movement
• 7:18
  Speaker 1: for that on Capitol Hill. But it's justin let let
• 7:21
  Speaker 1: me just break in because it makes me think, is
• 7:23
  Speaker 1: there a possibility that the Republicans would take this as
• 7:26
  Speaker 1: an opportunity and therefore, because you know, one of the
• 7:29
  Speaker 1: issues has always been if you were to in some
• 7:32
  Speaker 1: way smooth the path for Puerto Rico to become part
• 7:35
  Speaker 1: of to become a state, that would tilt the balance
• 7:39
  Speaker 1: in the Senate, and uh, is this an opportunity for
• 7:43
  Speaker 1: the Republicans to maybe gain if they seize the moment. Well,
• 7:49
  Speaker 1: it's it's tricky politics for sure. The statehood um issue
• 7:54
  Speaker 1: is not something that we've seen a lot of traction
• 7:56
  Speaker 1: on here in Washington, and I would be very surprised
• 7:59
  Speaker 1: if that was now come. But it is going to
• 8:02
  Speaker 1: be tricky to navigate, I think for politicians on both
• 8:05
  Speaker 1: sides of this, because a lot of Puerto Ricans who
• 8:07
  Speaker 1: are displaced by storm are going to end up moving
• 8:11
  Speaker 1: to the Continental US where they can vote just like
• 8:14
  Speaker 1: any other American citizen and make their voices heard. But
• 8:16
  Speaker 1: a lot of that it's likely to happen in Florida,
• 8:20
  Speaker 1: where a big influx influx into a state that has
• 8:24
  Speaker 1: historically been a swing state kind of fifty fifty Republican Democrat,
• 8:29
  Speaker 1: uh could really be impacted by tens or hundreds of
• 8:33
  Speaker 1: thousands of people moving there, and they if they are
• 8:36
  Speaker 1: upset by the government's handling of of the storm, that
• 8:40
  Speaker 1: could really create um some political trouble for Republicans. Similarly,
• 8:45
  Speaker 1: if Democrats aren't seen as responsive enough here or in
• 8:48
  Speaker 1: some way holding up the relief effort, then you know,
• 8:51
  Speaker 1: can swing back the other way. But I think a
• 8:53
  Speaker 1: lot of politicians are sort of attuned to the political
• 8:56
  Speaker 1: consequences of what's happened, justin Do you have a sense
• 8:59
  Speaker 1: of the response overwhelmingly in Puerto Rico, because we've seen
• 9:03
  Speaker 1: some conflicting reports out the governor trying to make peace
• 9:06
  Speaker 1: up between the mayor of San Juan and President Trump,
• 9:10
  Speaker 1: others saying look, we have a ways to go, trying
• 9:13
  Speaker 1: to saying kumba ya. Is that the mood among the
• 9:16
  Speaker 1: residents or are they even following this because I know
• 9:19
  Speaker 1: internet has been down, yeah, exactly. So it's it's hard
• 9:22
  Speaker 1: to get a real sense um of what sentiment on
• 9:25
  Speaker 1: the island is both because uh, communications have been difficult,
• 9:29
  Speaker 1: but also I think the primary concern for most of
• 9:32
  Speaker 1: the people in Puerto Rico is can I get somewhere
• 9:34
  Speaker 1: that the air conditioned. Can I get food and clean
• 9:37
  Speaker 1: water and sort of the basic services that people need
• 9:41
  Speaker 1: to to stay alive and live their lives. Can I
• 9:43
  Speaker 1: start rebuilding my business? So uh, it's not clear how
• 9:47
  Speaker 1: engaged um the sort of everyday people of Puerto Rico
• 9:51
  Speaker 1: are and this sort of back and forth spat that
• 9:54
  Speaker 1: we saw over the weekend, But you know, the governor's
• 9:57
  Speaker 1: comments are indicative of I think a politician who knows
• 10:01
  Speaker 1: that massive federal aid is going to be needed and
• 10:04
  Speaker 1: that is going to be distributed through the White House
• 10:07
  Speaker 1: in some way. And so even if I think the
• 10:10
  Speaker 1: governor might be sensing frustration among um, the constituents in
• 10:15
  Speaker 1: Puerto Rico or be a little uh starting to get
• 10:19
  Speaker 1: agitated with the federal response, there is sort of a
• 10:22
  Speaker 1: strategic advantage and keeping uh that sort of come by
• 10:25
  Speaker 1: a spirit together because it's gonna be a long rebuilding process.
• 10:29
  Speaker 1: Justin is that is that a contrast to what would
• 10:32
  Speaker 1: happen to a state versus being a commonwealth that you
• 10:36
  Speaker 1: would go directly to the president rather than if you
• 10:39
  Speaker 1: were a state and you had a coalition or a
• 10:42
  Speaker 1: group of colleagues in the Senate in the House. Well,
• 10:45
  Speaker 1: I mean, I think you bring up an important point,
• 10:48
  Speaker 1: which is that, um, you know, one Florida or Texas
• 10:51
  Speaker 1: were hit by the massive hurricanes. They do have to
• 10:55
  Speaker 1: sort of rely on the federal government for aide, but
• 10:58
  Speaker 1: that they have both a state government that is more
• 11:01
  Speaker 1: equipped to borrow money to help with recovery efforts that
• 11:06
  Speaker 1: sort of thing, and they have a congressional delegation of
• 11:09
  Speaker 1: at least you know, well two senators and at least
• 11:12
  Speaker 1: one member of the House of Representatives that can be
• 11:16
  Speaker 1: sort of forceful advocates for them in Washington, and whose
• 11:19
  Speaker 1: colleagues have to interact with them and count on them
• 11:22
  Speaker 1: and need their votes for a whole range of things. Well,
• 11:36
  Speaker 1: when we call upon Mark Gilbert are Bloomberg gad Fly columnists,
• 11:40
  Speaker 1: we want to know one thing, what is the aftermath
• 11:43
  Speaker 1: of the vote in Catalonia, the northeastern region of Spain,
• 11:48
  Speaker 1: where the Spanish government from Madrid did just about everything
• 11:52
  Speaker 1: they could think of in order to prevent the vote
• 11:56
  Speaker 1: from taking place, What went on and what should we
• 11:58
  Speaker 1: take away? Everything went wrong? I mean, they've had three
• 12:02
  Speaker 1: years of notice that that Catalonia was was was heading
• 12:06
  Speaker 1: for an independence vote. They could have diffused it. They
• 12:09
  Speaker 1: could have granted more independence. Economically to Catalonia, it's it's
• 12:12
  Speaker 1: the country's richest region. It contributes about a fifth of
• 12:15
  Speaker 1: the economic output. And yet Prime Minister Mariano RADIOI he's
• 12:20
  Speaker 1: done just about everything wrong. And those those YouTube videos
• 12:22
  Speaker 1: that we're seeing today of police using rubble bullets and
• 12:26
  Speaker 1: batons against the ordinary people who are voting. It's just
• 12:30
  Speaker 1: terrible for for the country, you know. Just there was
• 12:33
  Speaker 1: one image that really stuck out to me when I
• 12:35
  Speaker 1: was looking at the videos and pictures of a woman,
• 12:39
  Speaker 1: an elderly woman with gray hair, with blood coming down
• 12:42
  Speaker 1: her face, after getting into an altercation with the police
• 12:45
  Speaker 1: for voting allegedly illegally, because the Spanish government said that
• 12:50
  Speaker 1: this was not illegal vote. I'm just wondering what's the
• 12:55
  Speaker 1: path ahead. And markets seem incredibly sanguine given the amount
• 12:59
  Speaker 1: of turmoil now. Well even last week, the bookmakers odds
• 13:03
  Speaker 1: were putting the chances of a vote in favor of
• 13:05
  Speaker 1: independence between eighty and but that's largely because of turnout.
• 13:10
  Speaker 1: So they're about five million eligible voters in Catalonian, of
• 13:13
  Speaker 1: whom two point three million actually turned out, and of
• 13:16
  Speaker 1: whom two million backed independence. So you've got about voting
• 13:20
  Speaker 1: in favor of independence, but only on a turnout of
• 13:23
  Speaker 1: a bit more than forty. So the vote in terms
• 13:26
  Speaker 1: of claiming to be the will of the people, that's
• 13:29
  Speaker 1: tricky because a lot of those who oppose independence didn't
• 13:32
  Speaker 1: turn out. They take the government's view that this is
• 13:34
  Speaker 1: an illegitimate vote on the Spanish constitution um and surely
• 13:39
  Speaker 1: didn't turn out there. But you know, it's never a
• 13:41
  Speaker 1: good look on you, honestly, Mark, I mean in the US, honestly,
• 13:47
  Speaker 1: turnout isn't usually all that much more than that, frankly
• 13:50
  Speaker 1: for elections, which shouldn't be necessarily a model. But it's
• 13:53
  Speaker 1: pretty amazing that nearly half of the population voted in
• 13:57
  Speaker 1: this illegal referendum, according to the Spanish government, and then
• 14:01
  Speaker 1: the violence sort of sets up ongoing and escalating tension
• 14:03
  Speaker 1: going forward. Now it does, but the turnout matters for
• 14:07
  Speaker 1: something as momentous as seceding, And let's bear in mind
• 14:10
  Speaker 1: Catle only has debts of about six billion euros. The
• 14:13
  Speaker 1: Spanish country as a whole as debt of about one
• 14:16
  Speaker 1: point two trillion euros. So not only will catalonly have
• 14:19
  Speaker 1: to take on a chunk of that debt, as I said,
• 14:21
  Speaker 1: it accounts for about a fifth of economic output, so
• 14:23
  Speaker 1: on on a competitive basis, it would end up with
• 14:26
  Speaker 1: about a fifth of those debts. The European Union says
• 14:29
  Speaker 1: it won't be part of the EU even if it
• 14:31
  Speaker 1: man it's the succeed so it will be out there
• 14:33
  Speaker 1: on a limb. It would make Brexit look like a
• 14:35
  Speaker 1: walk in the park. And so the turnout really does
• 14:38
  Speaker 1: matter for something as momentous as a readion of Spain
• 14:41
  Speaker 1: seceding from the country as a whole. And the problem
• 14:44
  Speaker 1: is that the government has wanted the problem to go away.
• 14:46
  Speaker 1: It kind of wish they would go away. Now it's
• 14:49
  Speaker 1: on its doorstep. It's not really clear where roy can
• 14:51
  Speaker 1: turn next. Our investors expressing their doubts by pulling money
• 14:56
  Speaker 1: from the stock market. I'm just looking at a chart
• 14:59
  Speaker 1: of the I becks thirty five and if you go
• 15:02
  Speaker 1: back to the beginning of May of of the year,
• 15:06
  Speaker 1: you were looking at well, you know, a peak, right,
• 15:09
  Speaker 1: so over eleven thousand but now we're down almost eight
• 15:13
  Speaker 1: percent and it has been a steady decline. Is that
• 15:17
  Speaker 1: an expression that investors are saying, look, I'm really not
• 15:20
  Speaker 1: interested in adding more capital, so the prices are getting cheaper.
• 15:24
  Speaker 1: The benchmark stock index is down about two percent today,
• 15:28
  Speaker 1: whereas the rest of Euros benchmark indexes are up. In
• 15:31
  Speaker 1: the past month, the IBEX index is underperformed the stock
• 15:34
  Speaker 1: six hundred, the benchmark for the Aurozone, by about four percent,
• 15:38
  Speaker 1: so clearly it's having an effect. A couple of the
• 15:40
  Speaker 1: Barcelona based banks are down about five percent or so today,
• 15:43
  Speaker 1: Kaiser Bank, Banco Sabadel. They're being hit the worriors that
• 15:47
  Speaker 1: you can end up with a general strike in Catalonia
• 15:50
  Speaker 1: um and I think that some of the secessionists are
• 15:53
  Speaker 1: threatening to call a general strike in the idea is
• 15:55
  Speaker 1: if if, if, if we're in favor independence, then forty
• 15:59
  Speaker 1: percent not turn up for work, and again with the
• 16:02
  Speaker 1: reason contributing a fifth of Spanish economic output. You know
• 16:05
  Speaker 1: there's a nascent economic recovery in Spain, unemployment down, but
• 16:09
  Speaker 1: the last thing it needs as a general strike in
• 16:11
  Speaker 1: this kind of this kind of strife going on, investors
• 16:14
  Speaker 1: have have punished the bonds as well. A ten year
• 16:16
  Speaker 1: yields up about time basis points, but it's down from
• 16:19
  Speaker 1: where it was earlier this year, so there's not a
• 16:21
  Speaker 1: sense of panic. There's not really a sense of crisis,
• 16:24
  Speaker 1: and investors have known this was coming for for for
• 16:27
  Speaker 1: a couple of weeks now um, but there's definitely a
• 16:30
  Speaker 1: feeling that this could turn nasty um and that Prime
• 16:33
  Speaker 1: Minister Marini a ra high has got to do something.
• 16:36
  Speaker 1: He's gonna have to offer some kind of olive branch
• 16:39
  Speaker 1: otherwise you can end up with this general strike and
• 16:41
  Speaker 1: that would be economically very damaging to the region and
• 16:44
  Speaker 1: to the country. Hey, Mark, when when do you think
• 16:46
  Speaker 1: you're gonna start to get to those analysts reports to
• 16:49
  Speaker 1: talk about how there's some value out there because these are, yes,
• 16:54
  Speaker 1: there are social and political events. They turned violent. They
• 16:58
  Speaker 1: make great headlines, and we feel for the people without,
• 17:02
  Speaker 1: you know, with physical injury and all that. But as
• 17:05
  Speaker 1: an investor, you know your job is supposed to be
• 17:08
  Speaker 1: able to find those things that other people have dropped
• 17:13
  Speaker 1: or have neglected because they are swayed or they are
• 17:17
  Speaker 1: manipulated by fear or or things that may not be
• 17:21
  Speaker 1: a long term positive. What you've sensed that at all,
• 17:24
  Speaker 1: And I'm sorry if you're taking so long, give you
• 17:26
  Speaker 1: about ten seconds or so. Now, Well, the in the
• 17:28
  Speaker 1: broader market, the euros down as well today. Now that
• 17:30
  Speaker 1: could be partly dullar strength, but it's definitely part of
• 17:33
  Speaker 1: the sentiment. Look, we saw the German election with the
• 17:35
  Speaker 1: populous DAFD winning some of the votes. That comes after
• 17:38
  Speaker 1: Macrome won the French election. This is populism in Spain.
• 17:42
  Speaker 1: It's a reminded. Look, we've got Italian elections coming up
• 17:45
  Speaker 1: at some point. It's a reminder of the political landslape
• 17:47
  Speaker 1: in Europe is not completely settled, even after Macrome won
• 17:51
  Speaker 1: the French presidency. It's a reminder of the risks. There
• 17:54
  Speaker 1: is it a buying opportunity? Well, I mean, what is
• 17:56
  Speaker 1: there Is there a particular company, let's say in Spain,
• 17:59
  Speaker 1: because you know, just because it's in Spain doesn't mean
• 18:02
  Speaker 1: it just has a Spanish market. I think for example
• 18:04
  Speaker 1: of Iberdrola, And I mean you have very large companies
• 18:08
  Speaker 1: that are financials. I was looking at earlier. We Banko
• 18:12
  Speaker 1: San Sanderia is one of it's one of the biggest.
• 18:14
  Speaker 1: You say, you know, maybe this is you know, people
• 18:16
  Speaker 1: that have been looking to get into equities. You know,
• 18:19
  Speaker 1: if there was a catastrophe the United States, God forbid,
• 18:22
  Speaker 1: then you know you look at the same kind of thing. Listen,
• 18:24
  Speaker 1: the Eurozone economic revival is here, it is real. The
• 18:28
  Speaker 1: p m I is the Purchasing Manager indexes have been
• 18:31
  Speaker 1: rebounding for Europe all this year. European central banks about
• 18:34
  Speaker 1: to take its photoph the accelerator, but it's not quite
• 18:36
  Speaker 1: there yet. European stocks have been have been performing well. Um,
• 18:40
  Speaker 1: and this is this is a hic up, but it
• 18:42
  Speaker 1: is a reminder that the political backdrop to the whole
• 18:44
  Speaker 1: European Union project, Brexit notwithstanding, is still not set in stone,
• 18:49
  Speaker 1: and there could still be my steps ahead. You know,
• 18:52
  Speaker 1: I have to say I would take the other view. Frankly,
• 18:55
  Speaker 1: PIM is that you're saying there could be buying opportunities,
• 18:58
  Speaker 1: but there isn't that much selling. And perhaps the reason
• 19:01
  Speaker 1: why there isn't so much selling is because investors really
• 19:04
  Speaker 1: are looking at this and saying it's just a hiccup.
• 19:07
  Speaker 1: This has all been smoothed out in the past, even Brexit.
• 19:10
  Speaker 1: Yes we've seen consequences, but it hasn't been that serious.
• 19:13
  Speaker 1: Even the ten year treasure ten year yields in Spain.
• 19:16
  Speaker 1: It went up not tremendously. People don't seem that worried,
• 19:20
  Speaker 1: and perhaps it's because it's never been paid off to
• 19:22
  Speaker 1: to be too worried about some of these political events,
• 19:25
  Speaker 1: right well. I think that this one is particularly pressing
• 19:29
  Speaker 1: because of the implications for what it says about populism
• 19:33
  Speaker 1: in Europe, which you know, investors thought was off the
• 19:36
  Speaker 1: table with the election of Macron in France, which has
• 19:39
  Speaker 1: come back with the German election a few weekends ago.
• 19:42
  Speaker 1: This reminds people that in Italy, which is the really
• 19:46
  Speaker 1: sort of the the core of of of the problem
• 19:49
  Speaker 1: of the Eurozone and its political issues, Italy still has
• 19:54
  Speaker 1: a five Star movement which is doing well in the polls,
• 19:56
  Speaker 1: which is still anti the euro and at some point
• 20:00
  Speaker 1: they're going to be an election in Italy. I think
• 20:02
  Speaker 1: that it's a reminder that that maybe the political backdrop
• 20:05
  Speaker 1: you're investing against is not too settled as as it
• 20:08
  Speaker 1: looked even a few weeks ago. Mark Gilbert, thank you
• 20:12
  Speaker 1: so much for your insights. Mark Gilbert is a Bloomberg
• 20:14
  Speaker 1: gad Flight columnists covering asset management and debt markets. Talking
• 20:18
  Speaker 1: about the Catalonia independence referendum and the ongoing turbulence that
• 20:23
  Speaker 1: has that it has engendered. I want to bring in
• 20:37
  Speaker 1: Chris Mackie now. He is the founder of Solution Nomics,
• 20:41
  Speaker 1: based in New York, and it is a platform described
• 20:45
  Speaker 1: as being dedicated to developing and disseminating return on investment
• 20:50
  Speaker 1: based corporate tax policy. Chris Mackie, thank you very much
• 20:55
  Speaker 1: for being with us. A former contributed to the Federal
• 20:57
  Speaker 1: Reserve Beije book. Uh your topic, and I want you
• 21:01
  Speaker 1: to expand if you can, though, because tax reform is
• 21:04
  Speaker 1: you know, it can lead you down a rabbit hole.
• 21:07
  Speaker 1: But specifically, what is the the US administration trying to
• 21:11
  Speaker 1: do with the relationship between US corporations, what they earned overseas,
• 21:16
  Speaker 1: how much tax they should pay, and how to get
• 21:19
  Speaker 1: as much of that money back to the United States
• 21:22
  Speaker 1: as possible. Well, good morning, it's a pleasure to be
• 21:25
  Speaker 1: with you. What they are trying to do is, and
• 21:28
  Speaker 1: this is their broader perspective in their entire proposal is
• 21:33
  Speaker 1: they're trying to stimulate job growth and higher wages. And
• 21:37
  Speaker 1: one of the theories is that if we lower the
• 21:39
  Speaker 1: tax rate on the earnings from overseas, that will entice
• 21:45
  Speaker 1: companies to use that cash to create more jobs in America.
• 21:48
  Speaker 1: And well, I commend the Republicans for undertaking a reform
• 21:53
  Speaker 1: of the tax code. That the problem is it's actually
• 21:55
  Speaker 1: not a reform, it's just more of the same. It's
• 21:59
  Speaker 1: let's lower the tax rates more unconditionally, which means that
• 22:02
  Speaker 1: whether or not those the foreign or in profits create
• 22:06
  Speaker 1: jobs in America, the tax rates will go down. Now
• 22:08
  Speaker 1: there's an alternative, which is to say, when companies increase
• 22:13
  Speaker 1: American employment and when they increase American wages, then we'll
• 22:17
  Speaker 1: have lower tax rates. And that's what we mean by
• 22:20
  Speaker 1: an r o I based tax policy. But Chris, I
• 22:25
  Speaker 1: wonder how much of this is a rhetorical exercise. And
• 22:28
  Speaker 1: so many companies pay a lower tax rate, they probably
• 22:31
  Speaker 1: pay more in line with where the government would like
• 22:34
  Speaker 1: to cut the taxes due to all of the deductions
• 22:37
  Speaker 1: and other engineering that accountants do. So to me, I mean,
• 22:42
  Speaker 1: is this just you know, you could say, you know what,
• 22:44
  Speaker 1: what sounds better if you use it on a stump speech,
• 22:47
  Speaker 1: but in reality, the plan is just to try to
• 22:49
  Speaker 1: simplify things, uh, you know, to to get things into
• 22:53
  Speaker 1: a more kind of understandable level. Well, you bring up
• 22:57
  Speaker 1: a very good point, because the effective tax right, the
• 23:01
  Speaker 1: tax rate that companies have paid on average since two
• 23:04
  Speaker 1: thousand has actually been nineteen and a half percent, So
• 23:08
  Speaker 1: that's already below the statutory right. Now, the devils in
• 23:11
  Speaker 1: the details and whether or not they eliminate all of
• 23:15
  Speaker 1: the deductions that are currently out there that get companies
• 23:18
  Speaker 1: down to nineteen and a half percent. But regardless of
• 23:22
  Speaker 1: what they do with the rate, if they don't tie
• 23:25
  Speaker 1: each company's tax rate to each company's rate of job
• 23:29
  Speaker 1: creation and wage level, it won't be real reform. It
• 23:33
  Speaker 1: will be just a continuation of a hope based policy.
• 23:35
  Speaker 1: Well but hold on a second, Chris, because if you
• 23:37
  Speaker 1: start to single out companies and start to evaluate what
• 23:41
  Speaker 1: job creation means, what individual companies sort of contribution to
• 23:46
  Speaker 1: the U. S. Economy is, this starts to look a
• 23:48
  Speaker 1: little more subjective and could end up being uh, somewhat
• 23:52
  Speaker 1: counter to sort of the spirit of capitalism. Now, oh no,
• 23:56
  Speaker 1: absolutely not. It is the embodiment of capitalism. It is
• 24:01
  Speaker 1: a merit based approach. I mean, you know, you know
• 24:03
  Speaker 1: we're talking about overseas profits. Well, that's you know, subjective,
• 24:07
  Speaker 1: whether or not the profits were how much the profits
• 24:10
  Speaker 1: were overseas or sys domestics. So the solution i'mics approaches. Look,
• 24:13
  Speaker 1: rather than haggling over winnowing profits in the US versusan
• 24:18
  Speaker 1: tax havens, let's actually focus on the job creation. Mean, look,
• 24:21
  Speaker 1: these companies already know how many people they're hiring, how
• 24:24
  Speaker 1: many people they're firing, they know the wages of their pain.
• 24:27
  Speaker 1: So we've already got the information. So it's just a
• 24:30
  Speaker 1: matter of using that information in creating a merit based
• 24:34
  Speaker 1: tax policy. You know, the Republicans talk about a postcard
• 24:38
  Speaker 1: for the individual tax fair, Well, we're proposing a postcard.
• 24:41
  Speaker 1: So you just have four metrics. You score each company
• 24:44
  Speaker 1: on those four metrics, and that determines their tax rate. Okay,
• 24:48
  Speaker 1: so can we I just want to get a bigger
• 24:50
  Speaker 1: sense here, because let's just get you know, scrub away
• 24:54
  Speaker 1: some of the phography can and say, all right, let's
• 24:57
  Speaker 1: just pretend for a minute that all the companies really
• 24:59
  Speaker 1: want to do and all the government really wants to
• 25:01
  Speaker 1: do is help them get the money that's now uh
• 25:04
  Speaker 1: is sitting in accounts overseas back to the United States.
• 25:08
  Speaker 1: What would be the most effective way to make that happen?
• 25:10
  Speaker 1: Because let's forget about time frames. What would what would
• 25:13
  Speaker 1: they need to do to make that happen? Do you think? Well,
• 25:17
  Speaker 1: first of all, the objective is not to get the
• 25:19
  Speaker 1: money back to the United States. The objective is to
• 25:22
  Speaker 1: get them to increase hiring and higher wages. So you
• 25:26
  Speaker 1: could have two companies they could both bring the profits back.
• 25:29
  Speaker 1: No, No No, I understand that. I understand that. But I'm
• 25:32
  Speaker 1: just asking what would let's be you know, I want
• 25:35
  Speaker 1: to be as a cynical as possible here. What what
• 25:38
  Speaker 1: what would be the way to get it back quickly? Oh?
• 25:41
  Speaker 1: The way to get it back quickly is to say, look,
• 25:43
  Speaker 1: the more jobs that you create in America and the
• 25:45
  Speaker 1: higher wages you pay, we're going to lower your tax
• 25:47
  Speaker 1: rate on those foreign earned profits you do. That will
• 25:51
  Speaker 1: lower the rates. Chris Mackie, thank you so much for
• 25:54
  Speaker 1: joining us. Chris mackey is a founder of Solution Omics,
• 25:56
  Speaker 1: which is based in New York, and also a contributor
• 26:00
  Speaker 1: to the Beige Book, so he has a good handle
• 26:02
  Speaker 1: on the US economy. Talking about what has been proposed
• 26:06
  Speaker 1: with respect to the tax code and what Chris would
• 26:09
  Speaker 1: like to see, which is uh, some kind of merit
• 26:11
  Speaker 1: based tax rate based on how many jobs you create
• 26:14
  Speaker 1: for the US. Here with us is Lily Kat's, a
• 26:29
  Speaker 1: fintech reporter for Bloomberg News who wrote a couple of
• 26:33
  Speaker 1: fascinating pieces in the past few days. First of all,
• 26:36
  Speaker 1: I want to talk about overstock dot Com, which I
• 26:38
  Speaker 1: think of when I was looking for bunk beds for
• 26:41
  Speaker 1: my kids and I saw a lot of overstocked items
• 26:44
  Speaker 1: that they were selling. Um. I think of this as
• 26:47
  Speaker 1: a sort of discount online retailer. I do not think
• 26:50
  Speaker 1: of this as a cyber currency provider, and yet that
• 26:55
  Speaker 1: is what's fueling it's returns right now. Can you can
• 26:57
  Speaker 1: explain a little bit. Yeah, it's pretty interesting. You know,
• 26:59
  Speaker 1: first Stock actually got into the cryptocurrency blockchain space back.
• 27:05
  Speaker 1: They were one of the first, if not the first
• 27:07
  Speaker 1: retailer to start letting people buy stuff online with cryptocurrencies.
• 27:12
  Speaker 1: And so they first started letting people use bitcoin to
• 27:14
  Speaker 1: buy you know, that bunk bett you might want to
• 27:16
  Speaker 1: purchase for your kid. Um. And they also inteen started
• 27:21
  Speaker 1: this initiative to develop blockchain technology. They called it Medici
• 27:25
  Speaker 1: Ventures and Medici Uh. The main part of Medici is
• 27:30
  Speaker 1: this other business called t zero, which I think includes
• 27:33
  Speaker 1: as it includes a fintech company and two broker dealers
• 27:36
  Speaker 1: and UM recently, the most recent exciting news that they've
• 27:39
  Speaker 1: announced is that they're starting a cryptocurrency exchange to actually
• 27:44
  Speaker 1: let people buy and sell different cryptocurrencies, so I they
• 27:51
  Speaker 1: Other than that, they've also started letting people pay with
• 27:54
  Speaker 1: other cryptocurrencies aside from Bitcoin on their website. So yeah,
• 27:58
  Speaker 1: it's pretty interesting to see a re tailor in in
• 28:00
  Speaker 1: this space, right. You know, I'm not going to make
• 28:03
  Speaker 1: you do the definition thing because it always goes over
• 28:06
  Speaker 1: my head. Anyway. I want to know, though, if you
• 28:09
  Speaker 1: said cryptocurrencies, take out the word crypto, do they need
• 28:12
  Speaker 1: a license in order to be able to do this
• 28:14
  Speaker 1: in the public venue. That is a great question, a
• 28:18
  Speaker 1: very dimond question, and a question that a lot of
• 28:21
  Speaker 1: people have different answers to. You know, the sec recently
• 28:25
  Speaker 1: came out with guidance saying, uh, you know, cryptocurrency, some
• 28:29
  Speaker 1: cryptocurrencies might be securities if um, you know, if you're
• 28:33
  Speaker 1: buying them and you're getting a return on them. Um.
• 28:37
  Speaker 1: The CFTC has come out and said these things might
• 28:40
  Speaker 1: be commodities. There are also lots of different licensees you
• 28:43
  Speaker 1: can get within different states, so a lot of exchanges,
• 28:47
  Speaker 1: for example, are regulated by state and maybe not by
• 28:50
  Speaker 1: federal regulators. So it's kind of like this big gray area.
• 28:53
  Speaker 1: It's kind of it's still such a new area, and
• 28:56
  Speaker 1: I don't think regulators have fully figured out how to
• 28:59
  Speaker 1: regulate it yet. Well. And it's interesting because the Commodity
• 29:02
  Speaker 1: of Futures UH Trading Commission just right now is looking
• 29:07
  Speaker 1: at some odd trading on coin base that they're calling
• 29:11
  Speaker 1: a flash crash in a cryptocurrency that you wrote about
• 29:15
  Speaker 1: in a story on the Bloomberg today. I thought this
• 29:17
  Speaker 1: was fascinating. You have UH cryptocurrency flash crash and the
• 29:21
  Speaker 1: specter of perhaps an unknown amount of leverage behind this
• 29:25
  Speaker 1: transaction that might have spurred such a crash. Can you
• 29:28
  Speaker 1: give us a sense of what happened here? And is
• 29:32
  Speaker 1: this is this? Does this matter? I mean, is this
• 29:34
  Speaker 1: enough money to matter at this point? Yeah, it's a
• 29:36
  Speaker 1: lot to digest, but um on. So back in June,
• 29:40
  Speaker 1: what happened was so there's this very popular cryptocurrency exchange
• 29:44
  Speaker 1: called coin base. It's where you know, most people go
• 29:47
  Speaker 1: to buy and sell Bitcoin and the second largest cryptocurrency,
• 29:50
  Speaker 1: which is called ether UH. And on June one, there
• 29:54
  Speaker 1: was this flash crash, and basically there was this big
• 29:58
  Speaker 1: twelve point five million dollar cell order that came in,
• 30:01
  Speaker 1: which was like one of the biggest ever on the exchange,
• 30:05
  Speaker 1: and that the exchange kind of couldn't handle that much volume,
• 30:10
  Speaker 1: and it caused the price of ether too plunge a bit,
• 30:14
  Speaker 1: and then that triggered a lot of other cell orders
• 30:17
  Speaker 1: to happen and so zooming out the price of Ether
• 30:21
  Speaker 1: within like forty five milliseconds crash from you know, around
• 30:24
  Speaker 1: three to ten cents and then shot back up because
• 30:28
  Speaker 1: of a twelve and a half million dollar or right yeah,
• 30:31
  Speaker 1: And it's I mean in the greatest scheme of things
• 30:33
  Speaker 1: looking at the stock market, right like that. And the
• 30:35
  Speaker 1: reason that then we all care so much about this
• 30:38
  Speaker 1: is what because the hype around digital currencies and blockchain
• 30:43
  Speaker 1: technology is so great that there's a proliferation of potential
• 30:48
  Speaker 1: uses or well a lot of people, I mean people
• 30:50
  Speaker 1: are putting a lot of money into this space, right Like,
• 30:52
  Speaker 1: people lost a lot of money from that flash crash happening,
• 30:56
  Speaker 1: and the space is only getting bigger and bigger. In
• 30:57
  Speaker 1: the last just this year alone, I think two billy
• 31:00
  Speaker 1: in dollars has flowed into initial coin offerings, which are
• 31:03
  Speaker 1: these new cryptocurrencies that are getting started. Um, but with
• 31:08
  Speaker 1: the flashcraft thing that I was just talking about. Um,
• 31:11
  Speaker 1: the CFTC we just learned is looking into what happened here,
• 31:16
  Speaker 1: and they've sent coin Base they Exchange a letter asking
• 31:20
  Speaker 1: a bunch of questions about one like about that twelve
• 31:24
  Speaker 1: point five million dollar trade, and to about margin trading,
• 31:28
  Speaker 1: which is when you extend buyers and sellers leverage so
• 31:33
  Speaker 1: they can you know, buy or sell more of an
• 31:36
  Speaker 1: asset than they'd otherwise be able to. Are these cryptocurrencies
• 31:39
  Speaker 1: not very frequently traded or is it just that they
• 31:42
  Speaker 1: usually treated in much smaller sizes the latter. Yeah, they
• 31:46
  Speaker 1: are frequently traded, right, most people don't do twelve point
• 31:48
  Speaker 1: five million dollar trade. Well, but but it's sort of
• 31:50
  Speaker 1: surprising because if coin base wants to be the big
• 31:53
  Speaker 1: player in this going forward, they have to have the
• 31:55
  Speaker 1: technology to be able to manage this. No, this is
• 31:58
  Speaker 1: commonplace and almost any other market out there. Yeah, No,
• 32:00
  Speaker 1: it's true. And they've they've been plagued by a lot
• 32:03
  Speaker 1: of other issues, uh, in the last year. So they've
• 32:06
  Speaker 1: had outages, they've had issues with the exchange being slow,
• 32:11
  Speaker 1: which you know, prevented people from being able to buy
• 32:13
  Speaker 1: and sell at certain points. And I mean, if you
• 32:15
  Speaker 1: think about it, it's kind of like like the startup
• 32:18
  Speaker 1: company that came into the space and maybe it didn't
• 32:21
  Speaker 1: expect this crazy volume to start hitting the exchange. So
• 32:25
  Speaker 1: maybe they're not prepared for this much. That's heavy of
• 32:28
  Speaker 1: a flow, you know. Thank you very much, Lily Cats,
• 32:32
  Speaker 1: fintech reporter for Bloomberg News. You know, just a quick
• 32:34
  Speaker 1: thing I want you, can you tell people your Twitter handled,
• 32:37
  Speaker 1: because this is a topic that we need all the
• 32:40
  Speaker 1: guidance we can get on and you're one of the
• 32:42
  Speaker 1: best sources I can. It's a very simple Twitter handle.
• 32:44
  Speaker 1: It's at Lily Cat's l A L y K A
• 32:47
  Speaker 1: t Z. Anything else you recommend us should be read.
• 32:50
  Speaker 1: I mean we read everything you right here at Bloomberg.
• 32:52
  Speaker 1: Read Read Bloomberg. We have good coverage of cryptocurrencies lately.
• 32:55
  Speaker 1: Well done. Thanks very much, Lily Cat's fintech reporter for
• 32:58
  Speaker 1: Bloomberg News. Thanks for listening to the Bloomberg P and
• 33:04
  Speaker 1: L podcast. You can subscribe and listen to interviews at
• 33:07
  Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm
• 33:12
  Speaker 1: pim Fox, I'm on Twitter at pim Fox. I'm on
• 33:15
  Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You
• 33:19
  Speaker 1: can always catch us worldwide on Bloomberg Radio