Latest / Bloomberg Intelligence / Trump's Animal Spirits Are Threatened by China Trade Tiff

Transcript

Trump's Animal Spirits Are Threatened by China Trade Tiff · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim
• 0:08
  Speaker 1: Fox along with my co host Lisa A. Brahmowitz. Each
• 0:11
  Speaker 1: day we bring you the most important, noteworthy, and useful
• 0:14
  Speaker 1: interviews for you and your money, whether you're at the
• 0:17
  Speaker 1: grocery store or the trading floor. Find the Bloomberg P
• 0:20
  Speaker 1: and L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com.
• 0:27
  Speaker 1: President Donald Trump said that he had a quote very
• 0:30
  Speaker 1: good conversation with President j Ping of China that signaled
• 0:34
  Speaker 1: progress in the nation's trade dispute. Now, this came just
• 0:38
  Speaker 1: hours before federal prosecutors unsealed charges against the Chinese technology
• 0:43
  Speaker 1: firm for allegedly stealing trade secrets. Here to tell us
• 0:48
  Speaker 1: more about the US China trade relationship is Mike McDonough,
• 0:52
  Speaker 1: chief economist for financial Products for Bloomberg LP, and he
• 0:56
  Speaker 1: joins us here in studio. Mike, what can you tell
• 1:00
  Speaker 1: us about the information so far regarding US China trade negotiations. Well,
• 1:08
  Speaker 1: we don't have a lot of information as it relates
• 1:10
  Speaker 1: to this new development, but um, the timing is interesting.
• 1:14
  Speaker 1: You have to say right when you know when, when
• 1:17
  Speaker 1: the economy is growing strongly, when equity markets are going up. Uh,
• 1:22
  Speaker 1: it's kind of easy to be more hawkish on China,
• 1:25
  Speaker 1: right because you know things are going well, why not
• 1:27
  Speaker 1: you know? Um, then when you know, you start seeing
• 1:30
  Speaker 1: big sell off in the market, there's some concern about
• 1:32
  Speaker 1: what could happen with this US China relation. You have
• 1:34
  Speaker 1: a midterm election. Um, you know, I think that that
• 1:39
  Speaker 1: probably has something to do with the timing another words,
• 1:42
  Speaker 1: President Trump wanted to give some kind of jolt to markets,
• 1:45
  Speaker 1: to stock markets ahead of the election by indicating that
• 1:48
  Speaker 1: could deal. Yeah, let's take a big step back. Let's
• 1:50
  Speaker 1: take steps step back. Right. You have to say, one
• 1:53
  Speaker 1: thing that the Trump administration has done a really good
• 1:55
  Speaker 1: job of is bringing animal spirits back into the market.
• 1:59
  Speaker 1: That is, people become blindly optimistic about the future, willing
• 2:02
  Speaker 1: to invest in their companies, you know, grow companies, and
• 2:05
  Speaker 1: which is great for the economy. And that's been happening.
• 2:07
  Speaker 1: And you could track that really by the spread between
• 2:10
  Speaker 1: survey based data and heart economic data. Survey based data,
• 2:13
  Speaker 1: economic data confidence numbers. Business confidence has been off the
• 2:16
  Speaker 1: charts since President Trump has been elected. And I think
• 2:19
  Speaker 1: the whole Trump rally was really predicated on the fact
• 2:22
  Speaker 1: that there was an expectation for gradual fed tightening, tax reform, deregulation,
• 2:27
  Speaker 1: and the belief that there'd be no major disruption international trade.
• 2:30
  Speaker 1: Uh so you go back to Q one, Suddenly you
• 2:33
  Speaker 1: have a tariff on washing machines. So that whole premise
• 2:37
  Speaker 1: that there's going to be no actual disruption international trade
• 2:40
  Speaker 1: got shaken, and you saw the market sell off earlier
• 2:42
  Speaker 1: this year. But then what we saw we saw a
• 2:45
  Speaker 1: deal with the EU that wasn't really a win. It
• 2:47
  Speaker 1: wasn't really a deal. It was a one one thousandths
• 2:50
  Speaker 1: of what would have been agreed upon with t TIP,
• 2:52
  Speaker 1: which was a trade deal and investment deal already in
• 2:54
  Speaker 1: the works. But that made people say, okay, easy win there.
• 2:57
  Speaker 1: This we were maybe a right originally. Then you had
• 3:00
  Speaker 1: to deal with NAFTA with Mexico and that was a
• 3:02
  Speaker 1: fraction of what um TPP would have been. So people said,
• 3:06
  Speaker 1: we're over worrying about this, and you saw markets continue
• 3:10
  Speaker 1: to go up. But then people started realizing, wait a second,
• 3:13
  Speaker 1: it's not the same with China then. And part of
• 3:15
  Speaker 1: the reason is if you survey most Americans, the majority
• 3:18
  Speaker 1: would say there's something wrong with our trade relationship with China.
• 3:22
  Speaker 1: They might not be able to put their finger on
• 3:23
  Speaker 1: it well and in fairness, on both sides of the aisle.
• 3:26
  Speaker 1: People agree on that that there have been some some
• 3:28
  Speaker 1: profound imbalances there. Yeah, so that that has helped give
• 3:31
  Speaker 1: President the administration some runway to run with the idea.
• 3:34
  Speaker 1: Uh some of their ideas. Now. I don't think the
• 3:36
  Speaker 1: majority of the population would agree with how President Trump
• 3:39
  Speaker 1: is handling it, but they most agree that something's wrong. Now.
• 3:42
  Speaker 1: All of a sudden, though, people are realizing this is
• 3:45
  Speaker 1: a lot more complicated than NAFTA. There probably won't be
• 3:48
  Speaker 1: this quick easy win and how far could this escalate?
• 3:51
  Speaker 1: Most people, I think have this idea that once you
• 3:53
  Speaker 1: tear off all imports on both sides, as as far
• 3:56
  Speaker 1: as it could go. But that's not necessarily the case.
• 3:58
  Speaker 1: Right We've already seen some issues bubbling up in the
• 4:01
  Speaker 1: self China see rhetoric from UM Vice President Pence. Uh.
• 4:05
  Speaker 1: So people are realizing this could go further. Uh and
• 4:08
  Speaker 1: at some point right now, China has been very reactive.
• 4:11
  Speaker 1: At some point they could become more proactive. UM. The
• 4:14
  Speaker 1: issue we had the US had with ZT, a Chinese company,
• 4:17
  Speaker 1: we were going to stop allowing them to buy any
• 4:20
  Speaker 1: US inputs that could have potentially bankrupt a major Chinese
• 4:24
  Speaker 1: tech company. The thing is, if you flip it over
• 4:26
  Speaker 1: and let's say President She had issues with some US companies,
• 4:30
  Speaker 1: he has a lot more firepower than President Trump has
• 4:34
  Speaker 1: on going after these companies. So there's a lot of
• 4:36
  Speaker 1: ways this could escalate in ways that would be really bad.
• 4:38
  Speaker 1: And I think the market is now kind of getting
• 4:40
  Speaker 1: a sense of that, and those animal spirits are retracting
• 4:43
  Speaker 1: a little or going back in the hibernation at least
• 4:45
  Speaker 1: a little bit. And you saw some of that evidence
• 4:47
  Speaker 1: maybe in the GDP data. Mike, just quickly, when I
• 4:51
  Speaker 1: think of China and I try to research China perspective,
• 4:55
  Speaker 1: I go to China daily just to see what the
• 4:58
  Speaker 1: Chinese perspective is. There is nothing except a small link
• 5:04
  Speaker 1: to anything having to do with President j pinon President
• 5:07
  Speaker 1: Donald Trump discussing trade on this phone call. The big
• 5:12
  Speaker 1: issue is aid to private businesses, does China need a
• 5:16
  Speaker 1: trade deal? China certainly doesn't want to have to deal
• 5:21
  Speaker 1: with the headwinds of a trade war. While it's you know,
• 5:24
  Speaker 1: it's it's the leveraging agenda. We talked about this the
• 5:26
  Speaker 1: other day. Had a little bit more negative effect on
• 5:29
  Speaker 1: growth than people had been anticipating, and it especially hit
• 5:33
  Speaker 1: the private sector hard because they were trying to stamp
• 5:35
  Speaker 1: out the shadow banking sector, which they benefited the most.
• 5:38
  Speaker 1: So they don't want to double whammy of having to
• 5:40
  Speaker 1: deal with a trade war and the domestic factors. So yeah,
• 5:43
  Speaker 1: I mean, I think they do need a trade deal.
• 5:46
  Speaker 1: Mike McDonough always a pleasure. Your insights are very valuable.
• 5:49
  Speaker 1: We really appreciate you being here. Mike mcdonnah, chief economist
• 5:52
  Speaker 1: for financial products for Bloomberg LP, talking about President Trump's
• 5:56
  Speaker 1: wish for a draft of a potential deal with China.
• 6:00
  Speaker 1: This comes ahead of the midterm elections, did cause a
• 6:02
  Speaker 1: pop in markets, although it is sort of different from
• 6:05
  Speaker 1: some of the rhetoric that we have heard from him
• 6:07
  Speaker 1: of late, so perhaps that is what markets were responding to.
• 6:15
  Speaker 1: The topic is globalization and global growth as well as populism.
• 6:21
  Speaker 1: Earlier today we heard from Matt forest Or, the chief
• 6:24
  Speaker 1: investment officer of bn y Melon's Lockwood Advisors, and he
• 6:27
  Speaker 1: says the biggest investor worry is a global slowdown. Here
• 6:31
  Speaker 1: to tell us about some of the forces that may
• 6:33
  Speaker 1: be affecting the global economy is Barry eichen Green. He
• 6:37
  Speaker 1: is an economist. He is a historian and a professor
• 6:40
  Speaker 1: of economics and political science at the University of California, Berkeley,
• 6:44
  Speaker 1: and he joins us appropriately from Athens, Greece, whose citizens
• 6:50
  Speaker 1: have of course endured economic insecurity as well as a
• 6:54
  Speaker 1: political system which many call on responsive. His latest book
• 6:59
  Speaker 1: is entire The Populist Temptation, Economic Grievance and Political Reaction
• 7:05
  Speaker 1: in the Modern Era. Professor I can Green, thank you
• 7:08
  Speaker 1: very much for being with us. Do you believe that
• 7:10
  Speaker 1: we are at a historical turning point that cannot be
• 7:13
  Speaker 1: changed or are there still individual forces which can, in
• 7:19
  Speaker 1: a sense reclaim the promise of globalization? I think the
• 7:26
  Speaker 1: um existing global system, global supply chains, the global division
• 7:32
  Speaker 1: of labor exists for good reasons and are deeply entrenched.
• 7:37
  Speaker 1: So big corporations understand the advantages of globalization. UH, informed
• 7:44
  Speaker 1: leaders understand the advantages as well, and quite simply beating
• 7:50
  Speaker 1: back the forces of populism UH nationalist populism on the right,
• 7:56
  Speaker 1: anti elite populism on the left. Squires helping those who
• 8:02
  Speaker 1: can't help themselves who are being displaced by globalization. The
• 8:06
  Speaker 1: fundamental problem is that we don't do create adjustment assistance
• 8:10
  Speaker 1: in the United States, we don't do the right kind
• 8:13
  Speaker 1: of education and training in principle, UH, those are solutions
• 8:17
  Speaker 1: we could adopt, Professor I can. One reason why we
• 8:22
  Speaker 1: were sort of drawn to this question is because Richard
• 8:24
  Speaker 1: Jones of Bloomberg wrote a peace where he said that
• 8:27
  Speaker 1: populism is the biggest threat to markets, and certainly he
• 8:31
  Speaker 1: is not alone in feeling that we are watching the
• 8:34
  Speaker 1: beginnings of a complete upheaval of our sense of the
• 8:38
  Speaker 1: global economy. Do you agree we're certainly seeing that kind
• 8:43
  Speaker 1: of upheaval in the United States with President Crump's trade
• 8:47
  Speaker 1: wars and aggressive rhetoric toward China. UM. I'm not sure
• 8:55
  Speaker 1: how broadly based globally this reaction is. If you spend
• 9:01
  Speaker 1: time in Asia, you learn pretty quickly that not only
• 9:04
  Speaker 1: China and Japan, but all the Southeast Aation economies are
• 9:09
  Speaker 1: still deeply committed to globalization and they're not turning away
• 9:13
  Speaker 1: from it. Despite all the noise in Italy over nationalism,
• 9:20
  Speaker 1: and despite Brexit, I think there is also deep in
• 9:25
  Speaker 1: a and and dividing support for UH an integrated global
• 9:29
  Speaker 1: economy in Europe. We're going to have to see now
• 9:32
  Speaker 1: what happens in Brazil. The story is always changing, but
• 9:38
  Speaker 1: I think it's important not to over generalize from the
• 9:42
  Speaker 1: peculiar things happening at the moment in the US, Professor
• 9:47
  Speaker 1: I can Green, Do you believe that the power of
• 9:52
  Speaker 1: political reform is likely to change the outcome as you
• 9:57
  Speaker 1: describe it in the United States? I think political reform
• 10:02
  Speaker 1: could UH create an environment where people think that their
• 10:07
  Speaker 1: government is being more responsive and that it's managing globalization
• 10:12
  Speaker 1: in a way that benefits everyone and not only the elites.
• 10:17
  Speaker 1: But if you ask me what kind of political reform
• 10:20
  Speaker 1: are we talking about, then it becomes harder. Campaign finance reform,
• 10:26
  Speaker 1: reform of how congressional district lines are drawn. In California
• 10:31
  Speaker 1: we outsourced that to an independent commission, reform the electoral college.
• 10:36
  Speaker 1: Those would be major reforms. To put it mildly, you know,
• 10:40
  Speaker 1: very I have to wonder did we get globalization wrong?
• 10:43
  Speaker 1: I mean, is this a legitimate rejection of certain aspects
• 10:46
  Speaker 1: of globalization that we're seeing in the movements that are
• 10:50
  Speaker 1: sweeping the globe right now. I think that we forgot
• 10:54
  Speaker 1: some basic um lessons about globalization. We got overly caught
• 10:59
  Speaker 1: up and include the UH professional economists and academics among
• 11:05
  Speaker 1: those who committed the mistake. I don't let myself off
• 11:08
  Speaker 1: the hook. Uh. Globalization international trade doesn't automatically raise all boats.
• 11:14
  Speaker 1: It doesn't benefit everyone equally. It benefits some absolutely, and
• 11:19
  Speaker 1: there are others who are who lose. And the fact
• 11:23
  Speaker 1: that we forgot that last point, and that we didn't
• 11:27
  Speaker 1: put in place education, training, place based policies that would
• 11:33
  Speaker 1: help to compensate the losers or put them in a
• 11:36
  Speaker 1: position where they would also benefit from globalization. We forgot
• 11:42
  Speaker 1: that fact and we're now seeing the consequences to those
• 11:45
  Speaker 1: consequences also express themselves in things such as status anxiety
• 11:51
  Speaker 1: and questions of identity. I think all of these things
• 11:56
  Speaker 1: are UM wrapped up together. So UM. The political landscape
• 12:02
  Speaker 1: in the US at the moment is very, very complicated,
• 12:05
  Speaker 1: as everyone knows. But some of the same people who
• 12:08
  Speaker 1: feel left behind by globalization are UM are are are
• 12:16
  Speaker 1: similarly UH feeling that they are being left behind in
• 12:20
  Speaker 1: terms of identity, politics, and UM their status is being
• 12:25
  Speaker 1: threatened by immigrant groups and others. Well, I guess it.
• 12:29
  Speaker 1: I just want to quickly get from you a sense
• 12:31
  Speaker 1: of do you think that populism could actually be beneficial
• 12:34
  Speaker 1: at the sort of wave just pushed and not forget
• 12:36
  Speaker 1: people have been left behind, could actually make the economy
• 12:39
  Speaker 1: globally stronger. Well, if by populism you mean UH political
• 12:44
  Speaker 1: movements and leaders with authoritarian tendencies, then I would say no.
• 12:50
  Speaker 1: If you mean UH political leaders who make policy on
• 12:55
  Speaker 1: the basis of disinformation, I would say no as well.
• 12:59
  Speaker 1: But UM disenfranchised people are rightly unhappy by their disenfranchisements,
• 13:05
  Speaker 1: so to the extent that they become part of the
• 13:09
  Speaker 1: political UH represented and mains political mainstream again, that can
• 13:15
  Speaker 1: only be a good thing. Barry I. Can Green, Well,
• 13:17
  Speaker 1: let you go get your phone. Barry I. Can Green
• 13:19
  Speaker 1: is economic historian, professor of economics and political silence science
• 13:22
  Speaker 1: at the University of California, Berkeley. Joining us from Athens, Greece.
• 13:26
  Speaker 1: We really appreciate you taking the time. Apple shares plunging
• 13:33
  Speaker 1: today the most since April sixteen, down nearly six percent,
• 13:38
  Speaker 1: after reporting a weaker than expected forecasts for holiday sales
• 13:42
  Speaker 1: of iPhones and also removing detailed information about the number
• 13:47
  Speaker 1: of iPhones that they sell each quarter going forward. Joining
• 13:50
  Speaker 1: us now Michael Scanlon, portfolio manager MANU Life Asset Management
• 13:54
  Speaker 1: in Boston, Michael, what was your reaction to this report
• 13:57
  Speaker 1: and do you think that the market response right now
• 14:01
  Speaker 1: is proportionate, disproportionate or not enough? Sure? So the results
• 14:06
  Speaker 1: last night pretty strong, Um, you know, as certainly within
• 14:09
  Speaker 1: the range of general expectations that the street was looking for. Obviously,
• 14:14
  Speaker 1: the biggest surprise that most people are focused on is
• 14:16
  Speaker 1: this movement that they're gonna no longer disclose the unit
• 14:19
  Speaker 1: sales of their individual products, which certainly could introduce more
• 14:24
  Speaker 1: volatility to the the results going forward. So why do you
• 14:26
  Speaker 1: think they did this? Um, you know, I'm not really sure.
• 14:31
  Speaker 1: I think when when you think about it longer term,
• 14:33
  Speaker 1: I guess their their point of argument would be that
• 14:36
  Speaker 1: focusing on how many units of a device they're selling
• 14:39
  Speaker 1: every given ninety days is less important than the longer
• 14:42
  Speaker 1: term trajectory of the business. But again, when you're modeling
• 14:46
  Speaker 1: these companies on a quarterly basis, you know those are
• 14:48
  Speaker 1: certainly important inputs. Um. You know, a pessimist would tell
• 14:52
  Speaker 1: you that, you know, the expectations are the iPhone units
• 14:55
  Speaker 1: are going to slow further, uh, and that they don't
• 14:57
  Speaker 1: want to have that as a highlighted number. Um. So
• 15:00
  Speaker 1: it's definitely gonna introduce more volatility to results going forward.
• 15:03
  Speaker 1: You own Apple shares right in your portfolios? Yeah, within
• 15:06
  Speaker 1: the John Haycock Balance one. We've been a long term
• 15:08
  Speaker 1: holder of the stock. Does this quarterly report make you
• 15:12
  Speaker 1: less willing to add to your allocation currently? Well, it's
• 15:17
  Speaker 1: a position that we've held for a long time. Um.
• 15:20
  Speaker 1: I think when you look at the results, really, for us,
• 15:22
  Speaker 1: the big thing that we always come back to is
• 15:24
  Speaker 1: just the total return profile of the stock. You look
• 15:27
  Speaker 1: at last year with the amount of cash that they
• 15:29
  Speaker 1: kicked off, they bought back seventy two billion dollars of stock,
• 15:31
  Speaker 1: the share count was down over six percent year over year,
• 15:35
  Speaker 1: and going forward they're committed to bringing that net cash
• 15:38
  Speaker 1: balance down to zero. So you know, I think you
• 15:40
  Speaker 1: can get a very high single digit return just from
• 15:43
  Speaker 1: the capital return on the stock buying back about six
• 15:45
  Speaker 1: percent and a point and a half on the dividend
• 15:47
  Speaker 1: um and then more modest operating income growth going forward.
• 15:51
  Speaker 1: But you know, when you look at that versus expectations
• 15:54
  Speaker 1: for the market on a total return basis, it's still
• 15:56
  Speaker 1: pretty attractive. Okay, Well, I mean, um, all right, let's
• 15:59
  Speaker 1: move on to the information that they have reported or
• 16:03
  Speaker 1: will report they've got a new product category, right, this
• 16:05
  Speaker 1: category wearables, home and Accessories. They produced record quarter there,
• 16:10
  Speaker 1: four point two billion. What's your outlook for how fast
• 16:14
  Speaker 1: that unit can grow. Each incremental device, in addition to
• 16:19
  Speaker 1: just the pure revenue number of it is increasingly important,
• 16:23
  Speaker 1: right because we always talk about Apple with getting people
• 16:25
  Speaker 1: into this ecosystem, and you know, getting a person to
• 16:27
  Speaker 1: buy that first device and then the second device is
• 16:30
  Speaker 1: incrementally more important when you think about some of those
• 16:33
  Speaker 1: other devices and you think about the watch, I mean
• 16:36
  Speaker 1: that's becoming more and more of a focal point. Is
• 16:38
  Speaker 1: they've added to sort of the healthcare element of it,
• 16:41
  Speaker 1: and you know there's obviously a lot of talk with
• 16:44
  Speaker 1: this echo cardiogram functionality that they'll have within there. So
• 16:47
  Speaker 1: all these incremental devices just add to the bowl case
• 16:50
  Speaker 1: for Apple. And when you think about the refresh rates
• 16:53
  Speaker 1: and the customer loyalty levels that they experience, you know,
• 16:57
  Speaker 1: when you look at the company's revenue base and the
• 16:59
  Speaker 1: multiple verse the SMP, it doesn't seem to reflect just
• 17:02
  Speaker 1: how loyal their customers are. Well, Apple will ultimately be
• 17:05
  Speaker 1: a software company and a services company and not a
• 17:09
  Speaker 1: hardware company. At its heart. UH. You know, they're certainly
• 17:13
  Speaker 1: focused on the services today, right and they have that
• 17:16
  Speaker 1: goal of doubling the services revenue UM to by and
• 17:21
  Speaker 1: it looks like they're going to get there probably next year,
• 17:23
  Speaker 1: so about a full year ahead of expectations. UM. You know,
• 17:27
  Speaker 1: the the certainly slowed units in terms of the iPhone
• 17:31
  Speaker 1: units that are sold. But you never know what they're
• 17:33
  Speaker 1: working on, right There's been a lot of speculation over
• 17:35
  Speaker 1: the years, whether it's a TV or a car. You
• 17:37
  Speaker 1: never know what that next device might be. But right
• 17:40
  Speaker 1: now there is a lot of focuses on the focus
• 17:42
  Speaker 1: on that service side of the business. What is your
• 17:45
  Speaker 1: thought about the Apple Watch and you believe that that
• 17:49
  Speaker 1: will be a big money maker for them, Well, right now,
• 17:53
  Speaker 1: it's not a huge money maker for them. I think
• 17:55
  Speaker 1: longer term, the opportunity there is to UM you know,
• 17:59
  Speaker 1: along the line of what they've been doing with the
• 18:01
  Speaker 1: heart monitoring and now this fall monitoring UH as well.
• 18:05
  Speaker 1: You know, if they're able to to move closer in
• 18:07
  Speaker 1: relationships with insurance companies UH and you know, have subsidized
• 18:11
  Speaker 1: pricing for those units to get more of them actually
• 18:14
  Speaker 1: out there in circulation, then it could start to be
• 18:17
  Speaker 1: a big driver for them going forward. But today it's
• 18:20
  Speaker 1: just not a it's not as big of a focal
• 18:22
  Speaker 1: point for investors as things like the iPhone units are
• 18:24
  Speaker 1: iPhone e sps are. So Apple shares are seeing their
• 18:28
  Speaker 1: biggest declient at least in the initial hour of trading
• 18:31
  Speaker 1: since two thousands sixteen. Is this a buying opportunity? Well,
• 18:35
  Speaker 1: when you look at the stock, I mean, you know,
• 18:37
  Speaker 1: Apple is going to be out there buying the shares again.
• 18:39
  Speaker 1: They've committed to getting that hundred and thirty five billion
• 18:42
  Speaker 1: dollars or share of a hundred thirty five billion dollars
• 18:45
  Speaker 1: of cash or about twenty bucks a shared down to
• 18:47
  Speaker 1: a net zero. Uh. So they're going to be buying
• 18:50
  Speaker 1: back an extraordinary amount of shares. I'm not surprised to
• 18:53
  Speaker 1: see the stock week on the open here. Uh And
• 18:56
  Speaker 1: again that's just reflective of UM a little bit softer
• 18:59
  Speaker 1: guide on the top line for next quarter and this
• 19:02
  Speaker 1: new call it volatility that could be introduced to the
• 19:05
  Speaker 1: results as as they're no longer just going to disclose units.
• 19:08
  Speaker 1: Michael Scanlon, thank you very much for spending time with us.
• 19:11
  Speaker 1: Michael Scanlon is portfolio manager for Manu Life as said management.
• 19:16
  Speaker 1: They're based in Boston. The topic, of course Apple and
• 19:19
  Speaker 1: the shares of Apple right now is least was saying
• 19:22
  Speaker 1: down more than six per cent, Apple saying that they
• 19:26
  Speaker 1: are no longer going to report unit sales of iPhones.
• 19:34
  Speaker 1: Joe Meisack, the editor for the Bloomberg Brief on Municipals,
• 19:38
  Speaker 1: joins us now in our Bloomberg Interactor broker's studio Joe
• 19:42
  Speaker 1: Mysak four days, one hour, forty minutes to the mid
• 19:46
  Speaker 1: term elections. Are municipal bond markets ready for the outcome
• 19:52
  Speaker 1: of those elections? Well? Sure, plus we have the bond elections. PIM.
• 19:57
  Speaker 1: Come on, Well, that's what I'm asking about. Billion dollars
• 20:01
  Speaker 1: in municipal bonds on ballots, which is, you know, not
• 20:05
  Speaker 1: the record for the general election. That's a little over
• 20:09
  Speaker 1: eight billion, but it's still pretty good and it shows
• 20:12
  Speaker 1: you that municipalities are really serious about getting back to
• 20:17
  Speaker 1: WRK Okay. So just get a little bit more specific here.
• 20:20
  Speaker 1: So basically, municipalities are saying to voters, please sign off
• 20:24
  Speaker 1: on these projects and say that you'll pay for them,
• 20:26
  Speaker 1: and you'll be willing to fund the assessments that come
• 20:29
  Speaker 1: along with them. Uh, and then we'll go ahead and
• 20:32
  Speaker 1: make improvements. Can you give us a sense of what
• 20:34
  Speaker 1: some of these projects are and where they are? Okay,
• 20:37
  Speaker 1: in in Colorado, for example, there they have a couple
• 20:40
  Speaker 1: of transportation, big roadway issues. But I was struck when
• 20:46
  Speaker 1: I took a look at the list from I pre oh,
• 20:50
  Speaker 1: the guys who put together how many deals and how
• 20:56
  Speaker 1: much borrowing is for schools? So much is for school construction,
• 21:02
  Speaker 1: school renovation, pools, athletic facilities, so much for children's hospital,
• 21:09
  Speaker 1: high schools. Uh, that's really the you know, and that
• 21:14
  Speaker 1: that's usually what we see to schools, that's what people
• 21:17
  Speaker 1: are spending money on, and that's what people are there,
• 21:21
  Speaker 1: what governments are asking people to spend money on. It's fabulous.
• 21:24
  Speaker 1: And the states where we're seeing most of this potential
• 21:27
  Speaker 1: issuance California, Texas, California, Colorado, Texas. You know, but let's
• 21:34
  Speaker 1: step back here just a bit, because we talked about
• 21:37
  Speaker 1: seven year, six billion dollars, and of course it never
• 21:40
  Speaker 1: all comes to market the year after that. It takes
• 21:43
  Speaker 1: municipalities and states years to go through their authorized but
• 21:48
  Speaker 1: unissued amounts. Uh. So you know, it's not as though, oh, yeah,
• 21:52
  Speaker 1: we're gonna see this big bumpet volume. Next year we'll
• 21:55
  Speaker 1: probably see a big bumpet volume anyway, because we're what
• 21:57
  Speaker 1: about probably wind up the year it over three d
• 22:00
  Speaker 1: billion billion. Maybe next year we'll see wouldn't be surprised
• 22:07
  Speaker 1: four hundred maybe. Um So why why now? Why are
• 22:11
  Speaker 1: we seeing so many, so many projects like this being floated?
• 22:14
  Speaker 1: Now you know there's a boom going on out there,
• 22:19
  Speaker 1: although you may not know it. This has been our theme,
• 22:22
  Speaker 1: I want to say, for the last two years, where
• 22:27
  Speaker 1: so many municipalities are putting you know, they're going after
• 22:32
  Speaker 1: with hammered tongs, either economic development projects or roadways or
• 22:38
  Speaker 1: bridges or sewers or sidewalks. Their new issuance is up
• 22:44
  Speaker 1: this year. The thing that we saw take a hit
• 22:47
  Speaker 1: out of the market is when Congress did away with
• 22:50
  Speaker 1: advance of fundings. Otherwise, municipalities are after, you know, the
• 22:56
  Speaker 1: longest time of being down because of the financial crisis.
• 23:01
  Speaker 1: They're really back to it and building stuff. So I
• 23:05
  Speaker 1: think at one point earlier this year new issue volume
• 23:08
  Speaker 1: solely new money being raised was up. Something which is
• 23:12
  Speaker 1: astounding in the muni market is this because states are
• 23:16
  Speaker 1: confident about their tax collections and that's connected to the
• 23:20
  Speaker 1: job market, I would I would say, so sure, they're
• 23:23
  Speaker 1: more they're more buoyant, upbeat about the state of affairs.
• 23:30
  Speaker 1: And you know, it's funny. Back in the seventies, for example,
• 23:34
  Speaker 1: you remember PIM the the electorate was not very approving
• 23:41
  Speaker 1: of bond issues and so many of them went down.
• 23:44
  Speaker 1: But for the last I want to say, um, twenty years,
• 23:49
  Speaker 1: we've seen the electorate in a much more approving uh
• 23:56
  Speaker 1: uh attitude toward bond issues. So I wouldn't be surprised
• 23:59
  Speaker 1: if on Tuesday we see the approval ratio on these
• 24:03
  Speaker 1: bond issues more. Just real quick, I'd love to get
• 24:06
  Speaker 1: your thoughts on the healthcare bill coming due for New
• 24:09
  Speaker 1: York City, considering the fact that it hits pretty close
• 24:11
  Speaker 1: to home all the other post employment benefits story by
• 24:14
  Speaker 1: Martin Braun. Well, you know these other post employment benefits,
• 24:19
  Speaker 1: you don't you pay for them over time, and so
• 24:22
  Speaker 1: many municipalities, just like New York City, don't really put
• 24:26
  Speaker 1: aside a lot of money for them. They just know
• 24:28
  Speaker 1: they're gonna, you know, as the bills come in, that's
• 24:30
  Speaker 1: when you pay them. Some municipalities are starting to uh
• 24:34
  Speaker 1: you know, reserve and set aside lots of money for
• 24:37
  Speaker 1: these things, but other post employment benefits. It's one of those.
• 24:40
  Speaker 1: It's almost like a shadow number. Just to give a
• 24:43
  Speaker 1: little more color to that New York City needs to
• 24:45
  Speaker 1: end up or potentially could pay health costs for its
• 24:48
  Speaker 1: entire workers of a hundred and three billion dollars, which
• 24:51
  Speaker 1: is an increase of forty billion over a decade. And
• 24:54
  Speaker 1: how much has it set aside for that bill five
• 24:57
  Speaker 1: billion dollars, So that shortfall needs to get bridged at
• 25:00
  Speaker 1: some point, uh, and could potentially be a problem. Well,
• 25:06
  Speaker 1: you know, New York City has such a it's such
• 25:08
  Speaker 1: a robust economy and such a such a strong tax base. Uh.
• 25:14
  Speaker 1: You know, May I tend not to get too excited
• 25:16
  Speaker 1: about the open but that's me. Well, Joe Meisac, it's
• 25:20
  Speaker 1: just you, but we really appreciate your ideas. Joe Meisac
• 25:23
  Speaker 1: is the editor for the Bloomberg brief to focused on
• 25:26
  Speaker 1: musivals and has been in this market for decades, so
• 25:28
  Speaker 1: we actually do really value his views on all of
• 25:31
  Speaker 1: these things. We really appreciate you being with us the
• 25:35
  Speaker 1: conclusions just to get exercise. Uh. Nice and Lisa rom
• 25:40
  Speaker 1: when it's along with my co host and colleague pim Fox,
• 25:43
  Speaker 1: and this is Bloomberg. Thanks for listening to the Bloomberg
• 25:47
  Speaker 1: P and L podcast. You can subscribe and listen to
• 25:50
  Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 25:54
  Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox, I'm
• 25:58
  Speaker 1: on Twitter at Lisa, I'm Allo. Its one before the podcast.
• 26:01
  Speaker 1: You can always catch us worldwide on Bloomberg Radio