Latest / Bloomberg Intelligence / Contagion From Brazil to EM Is Relatively Limited, Dennis Says

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Contagion From Brazil to EM Is Relatively Limited, Dennis 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 Bramowitz. Each day we
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Right now,
• 0:32
  Speaker 1: I want to get some perspective from Jeff Dennis. He's
• 0:35
  Speaker 1: head of a global emerging market strategy at UBS Securities. Jeff,
• 0:39
  Speaker 1: I'm so glad that you could join us, because yesterday
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  Speaker 1: we did see, uh, the potential demise of the presidency
• 0:47
  Speaker 1: of Michele Tamair, although he refuses to resign um, but
• 0:51
  Speaker 1: certainly this and Jack's quite a bit more turmoil into
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  Speaker 1: the Brazilian economy, which already is struggling. I want to
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  Speaker 1: get your take. Do you think have you've seen any
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  Speaker 1: signs that there is some level of contagion that's moving
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  Speaker 1: away from Brazil and into other emerging markets ASTs as well.
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  Speaker 1: I think what's really interesting is you haven't seen very
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  Speaker 1: much contagion at all. Now. Obviously, when you get an
• 1:13
  Speaker 1: event like Brazil's sudden deterioration of the political situation, you
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  Speaker 1: will get some heavy selling in Brazil MSCI Brazil the
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  Speaker 1: doll adjusted index was down early fifteen percent yesterday, and
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  Speaker 1: you did get some fall out over the rest of EM.
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  Speaker 1: But in general we have the view here that particularly
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  Speaker 1: if you look at some of the allegedly vulnerable currencies
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  Speaker 1: in them, some of the high interest rate deficit currencies
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  Speaker 1: like a Turkey or South Africa, UM, they've all held up.
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  Speaker 1: They've both held up relatively well. So I think it's
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  Speaker 1: fair to say that you've got a shock effect. Of course,
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  Speaker 1: it looks like a one day shock effect at the moment,
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  Speaker 1: but the contagion into EM has been has been actually
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  Speaker 1: relatively limited. So is this just because low rates are
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  Speaker 1: here forever? People are just looking for that yield and
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  Speaker 1: they don't really care government, No government turmoil, no turmoil,
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  Speaker 1: doesn't really matter. More yield, that's all you need to know. Well,
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  Speaker 1: I mean, I think to a certain extent that it
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  Speaker 1: is that. I mean, our vi you on EM for
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  Speaker 1: this year has continued to be UM low, US bond
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  Speaker 1: deals flat to week a dollar, sucking money towards the
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  Speaker 1: emerging mars, pushing money towards the emerging markets, with some
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  Speaker 1: of these high interest rate markets, you know, doing quite
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  Speaker 1: well because currencies have been strong, and we're not sure
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  Speaker 1: that scenario is particularly damaged by this Brazil story, although
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  Speaker 1: of course Brazil was your ultimate number one carry trade story,
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  Speaker 1: if you like, with an e M And also, I
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  Speaker 1: think what people are doing is they're saying, look, this
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  Speaker 1: is a uniquely Brazilian situation that's developed, which is obviously
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  Speaker 1: very uncertain. We've published a note on it, and really
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  Speaker 1: the the issue here is how does the political scenario
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  Speaker 1: play out in Brazil now? But m a lot of
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  Speaker 1: uncertainty about that. But it's seen, I think by investors
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  Speaker 1: has really been a rather unique Brazilian situation and the
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  Speaker 1: global market backdrop, notwithstanding, of course, also a dramatic cell
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  Speaker 1: off in the US market on Wednesday, it's still seen
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  Speaker 1: as it's fairly benign, and I think that's why e
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  Speaker 1: m IS is held up very well. You know, Jeff,
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  Speaker 1: we've heard some comments from muhammadal Area and of Aliens
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  Speaker 1: and others talking about the increase of leverage in the
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  Speaker 1: market and given the sort of low rate environment that
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  Speaker 1: nothing can seemingly shake. I mean, yes, as you point to,
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  Speaker 1: there is what a day of volatility and then things
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  Speaker 1: are back to normal again, even though we still haven't
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  Speaker 1: resolved anything with the Brazilian situation of late uh So, Jeff,
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  Speaker 1: I'm wondering from your perspective, have you seen or are
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  Speaker 1: you worried about increasing leverage in emerging markets trades? Not really,
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  Speaker 1: I mean, I'm certainly not in a position to know
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  Speaker 1: how much leverage there is in terms of you know,
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  Speaker 1: people's positioning within the market. Well, we focus on much
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  Speaker 1: more is how much leverage there isn't there isn't economies
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  Speaker 1: and what that is doing for the economic outlook. And
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  Speaker 1: there's no doubt that since the global financial crisis there's
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  Speaker 1: been a tremendous increase in leverage in in e M countries.
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  Speaker 1: Obviously everybody always talks about that with respect to China,
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  Speaker 1: but other countries as well, such as career and the
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  Speaker 1: way we think that plays out as we think it,
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  Speaker 1: it is kind of a dampener, if you know, if
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  Speaker 1: you like, for growth um in these economies. Rather necessarily
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  Speaker 1: being a significant financial market risk, it just makes it
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  Speaker 1: hard for these countries to grow given how much debt
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  Speaker 1: has been taken on board. At the same time, our
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  Speaker 1: data tells us that over the last few quarters, corporates
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  Speaker 1: and e M have begun to shed some of that leverage.
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  Speaker 1: So um, I don't think leverage within these economies is
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  Speaker 1: a new problem at all. It's a constraint on growth.
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  Speaker 1: Where we are in terms of perhaps to be making
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  Speaker 1: leverage bets in the market that may be very different,
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  Speaker 1: But I'm you know, that's not something that I've got
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  Speaker 1: a tremendous amount of data on at this point in time.
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  Speaker 1: So do you think that there's still are opportunities in
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  Speaker 1: emerging markets debt and if so where well, I'm I
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  Speaker 1: don't do debt, and so I'm not going to common
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  Speaker 1: any detail on that. Although certainly why it's benign global
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  Speaker 1: environment continues, I think there is going to be You're
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  Speaker 1: going to continue to see yields potentially staying well to
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  Speaker 1: be low on on em dead as a whole. But
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  Speaker 1: I think overall, overall, on the equity side, we need
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  Speaker 1: to see if the markets are indeed going to settle down.
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  Speaker 1: We need see how the Brazilian story will play out,
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  Speaker 1: and where do you get any further US market weakness.
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  Speaker 1: But while yields are low, and while the dollars flats
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  Speaker 1: are weaker. Um, I think you'll find that emerging markets
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  Speaker 1: will will stabilize. We've got tremendous inflows coming into e M. UM,
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  Speaker 1: we're looking for strong earnings growth this year also across
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  Speaker 1: em ALO that's now at some risk as our Latin
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  Speaker 1: strategies to argue this morning in Brazil because of these
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  Speaker 1: events and so um, and of course everybody is talking
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  Speaker 1: about the seasons you know, selling main go away and that.
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  Speaker 1: Obviously that sort of thing is always a concern. But frankly,
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  Speaker 1: we think the fundamental backdrop to e M is still
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  Speaker 1: relatively good. And I think it's impressive how this Brazilian
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  Speaker 1: crisis which suddenly developed in a market that people have
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  Speaker 1: generally wanted to be in. I think the way it's
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  Speaker 1: had limited effect on the markets generally is quite impressive.
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  Speaker 1: Just real quick, Do you think that this complacency over
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  Speaker 1: the long run is going to be problem addict Um,
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  Speaker 1: I don't think it is at this level. And I'm
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  Speaker 1: talking about that Visa v as an e M strategist.
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  Speaker 1: Looking at valuations, I mean, valuations are a little on
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  Speaker 1: the high side in the M, but they're nothing like
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  Speaker 1: as stretch as they've been let me rephrase that they
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  Speaker 1: have not as stretch as they've been sometimes in the past.
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  Speaker 1: They're not as stretch as they are in the US.
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  Speaker 1: So I continue to believe that while is benign scenario
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  Speaker 1: plays out, most of the market risks actually exist in
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  Speaker 1: the developed world. Are we going to see further US
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  Speaker 1: market weakness, for example? Are we going to see an
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  Speaker 1: upside surprise and inflation that pushes bondial time? You know
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  Speaker 1: nothing neither of those, particularly being in our scenario, but
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  Speaker 1: those are the concerns and I don't I don't think Mark,
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  Speaker 1: given where global markets are, I don't see em as
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  Speaker 1: being complacent at all. Jeff Dennis, thank you so much
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  Speaker 1: for joining us. Jeff Dennis as head of Global Emerging
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  Speaker 1: Market Strategy at UBS Securities. He is based in Boston.
• 7:07
  Speaker 1: I want to bring in someone to sort of help
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  Speaker 1: understand what's really driving this. Mike mclog joins US now
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  Speaker 1: in our Bloomberg eleven three our studios. Mike McLoone is
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  Speaker 1: a commodity strategist for Bloomberg Intelligence, and Mike, how much
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  Speaker 1: is this a story of a supply demand dynamic that's
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  Speaker 1: improving for oil? And how much is this the weakening
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  Speaker 1: dollar that is giving rise to the price of crude.
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  Speaker 1: I guess the answers yes to that, all right, I understood,
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  Speaker 1: it's it's both um. One thing that was when we
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  Speaker 1: talked about oil earlier in there's oil needed a flush.
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  Speaker 1: It was all bullish at fifty five and fifty three
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  Speaker 1: early in the year, and all the positions were very long.
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  Speaker 1: We all knew supply was coming on and it's had
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  Speaker 1: its flushed. We had that and what's happened. We flushed
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  Speaker 1: out a lot of hedge fund positions, so it got
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  Speaker 1: down to forty five. Now it's bouncing again. One thing
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  Speaker 1: that's really changed for oil is it got rid of
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  Speaker 1: the positions. We are we you know, we kind of
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  Speaker 1: took the tide away, so saw what the market had
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  Speaker 1: and open and brought out opex resolve to cut. So
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  Speaker 1: that seems to be happening, and the dollars weaken this year.
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  Speaker 1: The dollar has been stronger four years in a row,
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  Speaker 1: so that's been a bit of a pressure factor in
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  Speaker 1: all CA money. So I see oil is stabilizing, not bullish,
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  Speaker 1: but it looks like we got rid of the flush.
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  Speaker 1: I mean, anytime it goes higher, we get more production.
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  Speaker 1: From the US. But it's done for now. It's it's
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  Speaker 1: a market. It's stuck, and it's in the middle of
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  Speaker 1: the range between forty five and fifty five. Although then
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  Speaker 1: you have to wonder if people are just getting rid
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  Speaker 1: of their shorts and going long, could the market be
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  Speaker 1: in for a swing to the downside later on if
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  Speaker 1: there isn't the same kind of support to sort of
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  Speaker 1: keep it up, you know, in other words, people who
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  Speaker 1: are have short bets that they're going to close out
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  Speaker 1: and sort of prop up or the market. Yeah, that's
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  Speaker 1: another yes, all right, I have to look my fare
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  Speaker 1: and put it up for the air and the wind.
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  Speaker 1: Because which way it goes now I don't know. But
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  Speaker 1: one thing that really had our ax to grind early
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  Speaker 1: in their as positions were way too long. There's still
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  Speaker 1: a little bit long, but they're mostly flushed. And which
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  Speaker 1: way it goes next, I don't know, but it looks
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  Speaker 1: like it's very well supported around forty five, very good
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  Speaker 1: resistance around fifty five, and we might be in arrange
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  Speaker 1: for who knows how long. And one way you can
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  Speaker 1: really tell the range of position emotions get really extreme
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  Speaker 1: at the at the ends, and we just got that again.
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  Speaker 1: So here we are in the middle. What do you do?
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  Speaker 1: You know, the momentum right now is up well. So
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  Speaker 1: next week OPEC members are going to meet and talk
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  Speaker 1: about prolonging the output cuts is they're widely expected to do.
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  Speaker 1: Given the recent bounce up in prices, how will that
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  Speaker 1: affect these negotiations? So I think that's what happened. This
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  Speaker 1: This bounce in prices is in the last few days,
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  Speaker 1: but for the year, crude oil is down or so
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  Speaker 1: it got down to forty five. To me, that brought
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  Speaker 1: out their resolve and they have made the point clear
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  Speaker 1: we're going to be cutting offsetting US production. It looks
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  Speaker 1: like it's happening. It looks like it should continue, and
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  Speaker 1: they have bested interest in doing something. They have rush
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  Speaker 1: on their side, so it looks like it's gonna work
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  Speaker 1: for now. One thing we did recent analysis and if
• 9:51
  Speaker 1: you look all the estimates of production of OPEC crude
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  Speaker 1: O help US US liquid fuels, that drop in production
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  Speaker 1: has been is the first time it's strap below month
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  Speaker 1: moving average since the crisis. So if this is sustained,
• 10:05
  Speaker 1: it should at least support the market. Now do bullmarket
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  Speaker 1: that's another story. You know, a couple of years ago,
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  Speaker 1: when we talked about the dramatic decline in crude values,
• 10:14
  Speaker 1: people were using it as a proxy for global growth.
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  Speaker 1: People were saying that there isn't as much demand from China,
• 10:19
  Speaker 1: that the US inventories are too full. Now it's a
• 10:24
  Speaker 1: totally different game. Why is it not considered a proxy
• 10:27
  Speaker 1: at all for economic growth or you know, maybe it should.
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  Speaker 1: People be reading more into it with respect to the
• 10:33
  Speaker 1: global expansion. That is the key question. And you have
• 10:36
  Speaker 1: to blame technology. That's what crude oil has going against it,
• 10:39
  Speaker 1: and that's why I like to bring out that's one
• 10:41
  Speaker 1: of the key commodities you can grow crude oil. I
• 10:44
  Speaker 1: used to have a farm, we grew we get a
• 10:45
  Speaker 1: lot of our patroying in this country are gasoline from corn.
• 10:49
  Speaker 1: Now so technologies well no, hell, I had a farm
• 10:53
  Speaker 1: and we we grew corn, and you know it's a
• 10:56
  Speaker 1: lot of it's now used for ethanol. Thirty of the
• 10:58
  Speaker 1: corn in this country. So basically ten percent of our
• 11:01
  Speaker 1: gasoline nousrom methanel. So that's what crudels going against it,
• 11:04
  Speaker 1: and that's why I always go back to the metals.
• 11:06
  Speaker 1: You can't grow metals, gold, copper, They've been mind since
• 11:11
  Speaker 1: antiquity and so looking ahead and commodities with the weaker dollar,
• 11:14
  Speaker 1: metals usually perform the best. And that's part of the
• 11:17
  Speaker 1: reason we put out a bit today that looks like
• 11:19
  Speaker 1: the pillars of a line for commodities. UM energy is
• 11:22
  Speaker 1: stopped going down, Crudel stopped going down. Looks like the
• 11:25
  Speaker 1: the dollar has peaked, and the agriculture market should be
• 11:29
  Speaker 1: doing well. With massive US exports corn beans, wheat meat,
• 11:33
  Speaker 1: their exports off the chart, and the really the main
• 11:35
  Speaker 1: way to suppress those exports is higher prices. Mike mclogan,
• 11:39
  Speaker 1: thank you so much for joining us. Truly fascinating. I'm
• 11:41
  Speaker 1: looking at iron ore contracts which are up almost five
• 11:43
  Speaker 1: percent today, so to your point, uh, they would be
• 11:45
  Speaker 1: the beneficiaries of some of this good news for them,
• 11:49
  Speaker 1: the lower dollar, as well as a generally benign environment.
• 11:53
  Speaker 1: Mike McLoone is an industrials analyst a commodity strategist for
• 11:56
  Speaker 1: Bloomberg Intelligence, and he joins us in our Bloomberg eleven
• 11:59
  Speaker 1: three oh studios in New York City. We want to
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• 12:42
  Speaker 1: at Bloomberg dot com slash lens. Well. We heard from
• 12:51
  Speaker 1: Steven manuch In, the head of the Treasure Department here
• 12:55
  Speaker 1: in the US yesterday. He gave his first Congressional testimony
• 12:58
  Speaker 1: since taking office, and it was a really why arranging
• 13:00
  Speaker 1: discussion from tax reform h to financial regulatory reform. Nathan
• 13:05
  Speaker 1: Dean was listening closely, and he had some pretty compelling thoughts.
• 13:08
  Speaker 1: Nathan Deed is a government analyst at Bloomberg Intelligence and
• 13:11
  Speaker 1: he comes to us from our Bloomberg studios in Washington,
• 13:14
  Speaker 1: d C. Nathan, thank you so much for joining us.
• 13:17
  Speaker 1: I want to just start with a bit of research
• 13:20
  Speaker 1: that you put out today, throwing some cold water on
• 13:23
  Speaker 1: some of the promises and the hopes that have been
• 13:25
  Speaker 1: reflected in markets for tax reform and financial regulation. Could
• 13:29
  Speaker 1: you just sort of give us a sense of what
• 13:31
  Speaker 1: your view is here. Yeah, you know, for tax reform,
• 13:33
  Speaker 1: this is something that we've seen in the financial sector
• 13:35
  Speaker 1: for ever since the election. I think everybody's seen what's
• 13:38
  Speaker 1: happened to financial stocks. You know. One of the things
• 13:41
  Speaker 1: that we point to is in late March, when you know,
• 13:43
  Speaker 1: they failed to pass the Obamacare's vote for the first time.
• 13:47
  Speaker 1: You know, bank stocks took about a teen percent hit.
• 13:49
  Speaker 1: Why because they wanted tax reform and it showed that
• 13:52
  Speaker 1: there wasn't the stability to agree on something, and we
• 13:55
  Speaker 1: just seemed to play out, you know, with the turmoil
• 13:57
  Speaker 1: that's going on in the White House right now and
• 13:59
  Speaker 1: some of the testimony from the Senate from Stephen Manuchin yesterday,
• 14:03
  Speaker 1: you know, the financial sector wants a tax reform and
• 14:05
  Speaker 1: there's just really no clear line to getting it done
• 14:08
  Speaker 1: this year. Well, did did Treasury Secretary Manuchin say anything
• 14:12
  Speaker 1: yesterday that gave you hope about anything concrete? So you know,
• 14:16
  Speaker 1: one of the things that I think from yesterday's hearing
• 14:19
  Speaker 1: that really surprised us with the amount of focus on
• 14:21
  Speaker 1: housing reform and specifically Fannie and Freddie, you know, Senator
• 14:24
  Speaker 1: crape of the chairman of the Senate Banking Committee, came
• 14:26
  Speaker 1: out and spent good deal of his opening statement talking
• 14:28
  Speaker 1: about housing reform. Secretary Menuchin came back and said, well,
• 14:32
  Speaker 1: you know, housing reform is something that we're going to
• 14:33
  Speaker 1: get to after dot Frank, so that probably is around
• 14:36
  Speaker 1: the July August time frame, and so there's seems to
• 14:39
  Speaker 1: be some momentum building for actually to try and do
• 14:42
  Speaker 1: something before the capital buffers of the g SS go
• 14:45
  Speaker 1: to zero, which is on January one. Well, and I'm
• 14:48
  Speaker 1: looking at the shares of Fanny May and they did
• 14:51
  Speaker 1: spike up after the election of President Trump and after
• 14:54
  Speaker 1: Stephen Manuchin made some comments that gave people a sense
• 14:58
  Speaker 1: that it was going to be re vamped reform to
• 15:00
  Speaker 1: possibly give more money back to shareholders, but then it
• 15:03
  Speaker 1: came right back down and really didn't move much. So
• 15:05
  Speaker 1: it's not that necessarily the market doesn't seem to be
• 15:07
  Speaker 1: pricing in because I'm kind a big reform or shift exactly.
• 15:11
  Speaker 1: And the one thing that we're telling our clients to
• 15:12
  Speaker 1: be careful of our comments from his the h f
• 15:15
  Speaker 1: A director Mel Watt, you know, he said that he
• 15:17
  Speaker 1: may stop the dividend payments to help with that capital situation.
• 15:22
  Speaker 1: You know, they asked the Secretary Treasury about that yesterday
• 15:24
  Speaker 1: and he just said, you know, I'm looking forward to
• 15:26
  Speaker 1: working with the f h f A on that um.
• 15:28
  Speaker 1: But you know, when I say that there's a momentum,
• 15:31
  Speaker 1: just have to remember it's also it's Congress. You know,
• 15:34
  Speaker 1: big things don't usually happen right now, and so you know,
• 15:37
  Speaker 1: as long as there's a silabuster in the Senate, and
• 15:39
  Speaker 1: this would actually be you know, a silibuster type entity
• 15:42
  Speaker 1: housing reform would would be subject to a filibuster, a
• 15:45
  Speaker 1: lot of things have to happen before it actually gets done,
• 15:47
  Speaker 1: you know, Nathan. One thing that I'm struck by is
• 15:49
  Speaker 1: that the bulk of financial regulation really doesn't come from
• 15:53
  Speaker 1: say Dodd Frank, but from some of these regulatory agencies.
• 15:57
  Speaker 1: And one thing that Treasury secretariest you have venution with Minutum,
• 16:00
  Speaker 1: was asked about yesterday was the sort of backdoor appointment
• 16:04
  Speaker 1: of someone to lead the Office of the Controller of
• 16:07
  Speaker 1: the Currency without having to get confirmed by Congress um.
• 16:13
  Speaker 1: And this actually leads to the potential for some of
• 16:16
  Speaker 1: these agencies to work together and change regulations outside of
• 16:19
  Speaker 1: the purview of Congress, can you talk a little bit
• 16:22
  Speaker 1: about what the scope for regulatory changes from the agency level.
• 16:27
  Speaker 1: So this is exactly how dot frank is going to
• 16:29
  Speaker 1: be rolled back. If you come in two twenty and
• 16:31
  Speaker 1: look back and what's happened, this is how it's going
• 16:33
  Speaker 1: to happen. So you can essentially roll back majority of
• 16:37
  Speaker 1: dot frank via the regulatory process and bypassed Congress what
• 16:41
  Speaker 1: they did at the o c C by putting in
• 16:43
  Speaker 1: a new you know, acting director that's only going to
• 16:45
  Speaker 1: be for a hundred thirty days, you know, but look
• 16:48
  Speaker 1: at them to actually start winding down the compliance and
• 16:50
  Speaker 1: the interpretive guidance and how people should react or some
• 16:54
  Speaker 1: comply with dot frank. There's a lot of things that
• 16:57
  Speaker 1: they can do to the vocal rule, to you know,
• 17:00
  Speaker 1: mutual fund regulations, to even capital change how things are calculated.
• 17:04
  Speaker 1: And so the regulatory process is the easiest way to
• 17:07
  Speaker 1: roll back dot frank. The problem is it just takes
• 17:09
  Speaker 1: a lot of time. Have we seen any progress whatsoever
• 17:12
  Speaker 1: in any regulatory body toward lighter regulation? Not yet. I mean,
• 17:17
  Speaker 1: I think the SEC and the CFTC are the ones
• 17:19
  Speaker 1: that are ahead of the game. You know, they're they're
• 17:21
  Speaker 1: now led by Trump appointees. You know, the Fund of
• 17:24
  Speaker 1: Reserve and the fd i C are still led by
• 17:25
  Speaker 1: Obama pointees. In the prudential banking space, they usually have
• 17:28
  Speaker 1: to agree, so that's going to be a little bit later.
• 17:31
  Speaker 1: But on the sec CFTC front, things actually impacting the markets.
• 17:34
  Speaker 1: We've begun to see some technical changes, but you know
• 17:38
  Speaker 1: the whole part, you know, most of the Dot Frank
• 17:40
  Speaker 1: still remains as is today, and real quick, Nathan. On
• 17:43
  Speaker 1: the tax reform side, are there any deadlines we should
• 17:45
  Speaker 1: be keeping an eye out that would prompt some real
• 17:49
  Speaker 1: kind of soul searching with respect to our tax code?
• 17:52
  Speaker 1: You know, I think I think if you look at
• 17:54
  Speaker 1: what Congress has to do, June and July is probably
• 17:56
  Speaker 1: gonna be spent a lot of time talking about the
• 17:58
  Speaker 1: FBI director. August is recess September, they're going to have
• 18:01
  Speaker 1: to be doing government shutdown and debt ceiling. So I
• 18:04
  Speaker 1: think October November is really when I think you're going
• 18:07
  Speaker 1: to see some more debate. But again, a lot of
• 18:10
  Speaker 1: it depends on what's going to go on with healthcare
• 18:12
  Speaker 1: and what's going to happen with the President. I love
• 18:13
  Speaker 1: how you say, you know, June and July, people are
• 18:15
  Speaker 1: gonna be looking at the FBI. I thought you're gonna
• 18:16
  Speaker 1: say people are gonna be sending a lot of time
• 18:18
  Speaker 1: in the beach, you know, contemplating their political careers. Imagine
• 18:22
  Speaker 1: it's been a bit of exhausting of an exhausting time
• 18:24
  Speaker 1: to keep track of both developments as well as potential
• 18:28
  Speaker 1: uh you know, red flags it really ought to be
• 18:30
  Speaker 1: paying attention to that could actually have a change. Uh.
• 18:33
  Speaker 1: And we really appreciate you following all that for us.
• 18:36
  Speaker 1: Nathan Dean is a government analyst of for financial services.
• 18:40
  Speaker 1: He works at Bloomberg Intelligence. He is coming to us
• 18:43
  Speaker 1: from a Bloomberg newsroom in Washington, d C. Talking about
• 18:48
  Speaker 1: what the implications are leading to as far as financial
• 18:52
  Speaker 1: reform and tax changes. Well, we've heard a lot about
• 19:08
  Speaker 1: President Trump's upcoming odyssey around the world. He's going to
• 19:11
  Speaker 1: be spending eight days across the Mideast and Europe. And
• 19:15
  Speaker 1: Marty Shanker is the senior executive editor of Global Economics
• 19:19
  Speaker 1: and Government here at Bloomberg News. He comes to us
• 19:21
  Speaker 1: now from Washington, d C. Marty, can you just start
• 19:25
  Speaker 1: by explaining what the purpose of this trip is other
• 19:28
  Speaker 1: than a nice uh, a bunch of photo opportunities in
• 19:31
  Speaker 1: a nice distraction. Well, every president test of his first
• 19:35
  Speaker 1: trip abroad, and this is it, all right? So the
• 19:38
  Speaker 1: purpose really is for Donald Trump to establish his presidential
• 19:44
  Speaker 1: stature in the world stage. Um. So it's a carefully
• 19:48
  Speaker 1: choreographed exercise in being presidential. And I think a lot
• 19:54
  Speaker 1: of people are anxious to see just how he performs this.
• 19:58
  Speaker 1: This White House is not been a hallmark of organization
• 20:02
  Speaker 1: and car choreography, um, but they have put a tremendous
• 20:06
  Speaker 1: effort in this one. So uh, let's see how it
• 20:09
  Speaker 1: turns out. Well. And when you talk about careful choreography,
• 20:12
  Speaker 1: I think that the big fear here is that President
• 20:14
  Speaker 1: Trump goes off script right. Well, yes, and that it's
• 20:19
  Speaker 1: not just outside the White House. I think that that's
• 20:22
  Speaker 1: true inside the White House. Um So Uh, some of
• 20:26
  Speaker 1: his more senior and trusted aids will be traveling with
• 20:30
  Speaker 1: him at various points, um, try and making sure he
• 20:33
  Speaker 1: stays on message. What is the messages? You know, these
• 20:39
  Speaker 1: are important relationships that uh, if he wants to fulfill
• 20:43
  Speaker 1: his agenda of making America great again, it's not something
• 20:46
  Speaker 1: he can do in a vacuum. UH. He is going
• 20:49
  Speaker 1: to need the help and cooperation of various people he's
• 20:52
  Speaker 1: going to see on this trip, so he has to
• 20:57
  Speaker 1: make sure that those relationships are not upset and in fact,
• 21:01
  Speaker 1: strength of Saudi Arabia being a great example of that.
• 21:04
  Speaker 1: And we've heard a lot about, you know, the potential
• 21:07
  Speaker 1: fight against ISIS Islamic state UH is just as well
• 21:11
  Speaker 1: as just terrorism in general. But will there be any
• 21:14
  Speaker 1: trade negotiations or anything beyond just the general spirit of cooperation.
• 21:20
  Speaker 1: I don't think you're going to see any any trade
• 21:25
  Speaker 1: issues come up with any specificity. UM. We have we
• 21:29
  Speaker 1: Bloomberg has reported that the on the receiving side of
• 21:33
  Speaker 1: Donald Trump, they've had a tough time figuring out who
• 21:36
  Speaker 1: to talk to in preparation for his arrival for the
• 21:39
  Speaker 1: G seven and UM and in in those venues in
• 21:44
  Speaker 1: the in the past couple of months, they've had rather
• 21:47
  Speaker 1: vague communications come out of those UM. But you will
• 21:51
  Speaker 1: see deals UM, you know, UH, contracts, UH investments in
• 21:57
  Speaker 1: the US. UM. The foreign leaders are also interested in
• 22:01
  Speaker 1: making sure that this goes smoothly, so that part of
• 22:05
  Speaker 1: it has been well coordinated among world leaders. They are
• 22:10
  Speaker 1: expecting the unexpected so they should be prepared. Yes. Indeed,
• 22:14
  Speaker 1: in Saudi Arabia, I believe has an actual clock counting
• 22:16
  Speaker 1: down the seconds to when President Trump arrives. I want
• 22:20
  Speaker 1: to highlight a comment by Secretary of State Rex Tillerson
• 22:23
  Speaker 1: in a recent Bloomberg story talking about quote, the people
• 22:27
  Speaker 1: in the rest of the world do not have the
• 22:29
  Speaker 1: time to pay attention to what's happening domestically here. Is
• 22:33
  Speaker 1: that true? Well, I don't. I don't think that that's
• 22:37
  Speaker 1: necessarily true. Um, the U s economy is, you know,
• 22:42
  Speaker 1: the largest in the world. Um. What we do here
• 22:45
  Speaker 1: on a policy, in policy and um in practical measures
• 22:52
  Speaker 1: has a great impact around the world. So obviously I
• 22:56
  Speaker 1: don't think who they are as domestic be focused as
• 23:00
  Speaker 1: Donald Trump would like to take this nation. But you
• 23:03
  Speaker 1: can't forget about Congress too. They h this is a
• 23:07
  Speaker 1: uh and the Republicans have always had a global approach
• 23:13
  Speaker 1: to how the US governs itself. So, UM, I'm not
• 23:18
  Speaker 1: quite sure where that takes us. But uh, I think
• 23:22
  Speaker 1: you will hear a very positive message coming out of
• 23:25
  Speaker 1: Donald Trump throughout his trip. Well, I mean, I think
• 23:27
  Speaker 1: that this was in reference to some of the controversy
• 23:29
  Speaker 1: that we've seen recently with the firing of James come
• 23:32
  Speaker 1: as head of FBI and then the subsequent memos that
• 23:35
  Speaker 1: we got. I think that there's this feeling that in
• 23:38
  Speaker 1: the U. S. There's a lot of focus on the internationally,
• 23:41
  Speaker 1: at least the White House is trying to project the
• 23:43
  Speaker 1: sense that there is not any sort of really broader consequence.
• 23:47
  Speaker 1: But is that true. I don't think you can. Basically,
• 23:52
  Speaker 1: you can dismiss what's happening here as of little consequence.
• 23:56
  Speaker 1: And I think that we have a story out this
• 23:58
  Speaker 1: morning that talks about how the swamp is fighting back. Um. Official,
• 24:06
  Speaker 1: the permanent Washington government that has ruled this town views
• 24:11
  Speaker 1: presidents as transients, and UM that the the gears that
• 24:16
  Speaker 1: run government continue regardless of NEOs president. So when those
• 24:21
  Speaker 1: gears get uh somewhat stuck when a special counsel was appointed,
• 24:26
  Speaker 1: everything slows down in this town. It's already slow, and
• 24:29
  Speaker 1: this will slow things down even more so. UM. I
• 24:33
  Speaker 1: think that that's extraordinarily consequential to how this White House governs. Um,
• 24:41
  Speaker 1: they're going to find it much harder to get things
• 24:43
  Speaker 1: done as a result of this. Yeah, well, I'm just wondering.
• 24:47
  Speaker 1: I mean, when we talk about the staying on message.
• 24:50
  Speaker 1: What are the opportunities that people are pinpointing for President
• 24:53
  Speaker 1: Trump to have a little bit more leeway and and
• 24:55
  Speaker 1: sort of how he comes across Well, I mean he's
• 24:58
  Speaker 1: actually if you if you've looked in the past of
• 25:01
  Speaker 1: his encounters with world leaders when they've been coming to Washington,
• 25:04
  Speaker 1: has been able to do those pretty well. Um, he is, uh.
• 25:09
  Speaker 1: And and in fact, those world leaders look like they
• 25:12
  Speaker 1: want to make Donald Trump look good. Um, so that
• 25:17
  Speaker 1: is probably something that's going to be replicated on this
• 25:19
  Speaker 1: overseas trip. There's not going to be any interest in
• 25:22
  Speaker 1: confronting them. And we even hear that the Pope will
• 25:26
  Speaker 1: not be preaching to Donald Trump about policy issues. So um,
• 25:33
  Speaker 1: if if that stays true, I think he's He's actually
• 25:37
  Speaker 1: this trip could could help change the narrative here. Marty Schenker,
• 25:40
  Speaker 1: thank you so much for joining and joining us. Marty
• 25:41
  Speaker 1: Schenker a senior executive editor of Global Economics and Government
• 25:44
  Speaker 1: for Bloomberg News in Washington, d C. Thanks for listening
• 25:51
  Speaker 1: to the Bloomberg P and L podcast. You can subscribe
• 25:54
  Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever
• 25:57
  Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter
• 26:01
  Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramoids one
• 26:05
  Speaker 1: before the podcast. You can always catch us worldwide on
• 26:08
  Speaker 1: Bloomberg Radio