Latest / Bloomberg Intelligence / Trump Can't Use 'Emergency' To Fund Wall: Feldman (Podcast)

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Trump Can't Use 'Emergency' To Fund Wall: Feldman (Podcast) · 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. President
• 0:33
  Speaker 1: Donald Trump will address the nation from the Oval Office
• 0:37
  Speaker 1: at nine pm Eastern Time this evening. Bloomberg, of course,
• 0:41
  Speaker 1: will cover the cover the president's speech as well as
• 0:45
  Speaker 1: the democratic response to the President's remarks. Now, this is
• 0:49
  Speaker 1: decided to be a focus of the national emergency that
• 0:53
  Speaker 1: he wants wants to declare over the border security, and
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  Speaker 1: the President has said in recent days that he might
• 0:59
  Speaker 1: employ the emergency funding for the border wall if Congress
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  Speaker 1: doesn't approve it. Well, can he do so? Noah Feldman
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  Speaker 1: is professor of law Harvard University also a Bloomberg opinion columnist.
• 1:12
  Speaker 1: He can be followed on Twitter at Noah are Feldman. Noah,
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  Speaker 1: can the President declare a national emergency to build a wall? No,
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  Speaker 1: he can't. There's no provision in the Constitution that says
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  Speaker 1: that the president can declare an emergency and then spend
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  Speaker 1: money that hasn't been appropriated to him, and Donald Trump
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  Speaker 1: can invent one for the occasion. There are provisions in
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  Speaker 1: law statutes that allow the president to declare an emergency
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  Speaker 1: and do certain things, but as far as I know,
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  Speaker 1: none of those provisions says that whence he's declared an emergency,
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  Speaker 1: the president can spend money on something that Congress has
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  Speaker 1: made it completely clear that it doesn't want him to
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  Speaker 1: spend money on, such as the wall, which has now
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  Speaker 1: been denied him by two Congresses in a row. Well,
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  Speaker 1: Provisor Felman, though there is a significant constituency within Congress
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  Speaker 1: who do support the wall, is there enough data that
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  Speaker 1: we have to make that assertion that definitely Congress does
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  Speaker 1: not want this. Yes, the previous Congress was asked to
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  Speaker 1: provide appropriation and funding for this and declined, and the
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  Speaker 1: current Congress has been asked to do so by the
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  Speaker 1: president and has declined. It never gets more explicit than
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  Speaker 1: that Congress has to be seen as a single body
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  Speaker 1: speaking with a single voice, and it says yes or
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  Speaker 1: no when it does it by a vote. In this instance,
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  Speaker 1: it's it said no, and it's it said no, twice.
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  Speaker 1: There's also president in Supreme Court precedent for thinking of
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  Speaker 1: Congress's refusal to authorize something as an explicit statement to
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  Speaker 1: the president that he that he can't do that thing.
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  Speaker 1: That goes all the way back to the famous steel
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  Speaker 1: seizure case when Harry Truman tried to seize the steel mills,
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  Speaker 1: and the Supreme Court said, this is a situation where
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  Speaker 1: Congress has not authorized the president to do this. And
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  Speaker 1: their proof was that there were other pieces of legislation
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  Speaker 1: that had authorized the presidents to do other sorts of things,
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  Speaker 1: but there was no legislation saying the president could seize
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  Speaker 1: in that way. And so the court said that was
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  Speaker 1: evidence that Congress did not intend to give the president
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  Speaker 1: this authority. Now, well, what does that National Emergencies Act
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  Speaker 1: outline as the specific powers of the president to declare
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  Speaker 1: an emergency. Well, one thing that's very frustrating about the
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  Speaker 1: National Emergencies Act is that it's kind of an empty shell.
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  Speaker 1: It says that the president may declare a state of emergency,
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  Speaker 1: and it says that when he does that, Congress could
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  Speaker 1: choose to overrule it. And it says that once he's
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  Speaker 1: done that, he has whatever authority comes from one of
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  Speaker 1: four hundred and seventies separate laws scattered all over the
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  Speaker 1: statute books, each of which confers some special authority on
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  Speaker 1: the president in an emergency. So then you have to
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  Speaker 1: figure out which one of those fourigers and the seventy
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  Speaker 1: plus laws is in play, and you have to see
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  Speaker 1: if there's any authority under those laws that actually would
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  Speaker 1: let the president do the thing in question. And in
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  Speaker 1: this instance, nobody has put forward to my knowledge. I've
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  Speaker 1: looked high and low some of our party that says
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  Speaker 1: that when the president there's a state of emergency, he
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  Speaker 1: can use uh, he can take money that hasn't been
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  Speaker 1: appropriated to do something that Congress doesn't want him to do. So,
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  Speaker 1: Professor Velevan, let's say President Trump says, you know what,
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  Speaker 1: I'm going to give this a try. Anyway, I'm going
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  Speaker 1: to go ahead and declare national emergency. Just take them,
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  Speaker 1: take the money, and it goes to the Supreme Court.
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  Speaker 1: Do you think that they would rule against him given
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  Speaker 1: the composition currently? I do. Even the conservative justices are
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  Speaker 1: real believers in the separation of powers, and there's probably
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  Speaker 1: no clearer violation of the separation of powers than the
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  Speaker 1: president deciding that he gets to spend money when it
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  Speaker 1: hasn't been appropriated by the Congress. You know, the fundamental
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  Speaker 1: power of Congress in the US constitutional system, The most
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  Speaker 1: basic thing they can do is the power of the purse.
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  Speaker 1: And if the president can get around the power of
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  Speaker 1: the purse, then we don't really need Congress anymore. And
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  Speaker 1: that can't possibly be the design that the Framers put
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  Speaker 1: in place. And the Conservatives on the Court our originalists,
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  Speaker 1: and they believe in what the Founders designed, and they're
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  Speaker 1: not interested in abolishing Congress. Noah Feldon, does the International
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  Speaker 1: Emergency Economic Powers Act? Does that offer the president away
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  Speaker 1: in which to use the legal apparatus of the government
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  Speaker 1: in order to change the direction or flow of financial transactions. Well,
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  Speaker 1: this is not an instance where financial transactions would be
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  Speaker 1: in play. I mean, there are emergency powers like the
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  Speaker 1: one that you mentioned, which say, for example, you know,
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  Speaker 1: if we're suddenly in a war with another country, or if, um,
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  Speaker 1: you know, our assets are seized another country, that the
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  Speaker 1: president could take unilateral steps, again authorized by Congress two,
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  Speaker 1: as you say, reverse the flow of transactions or freeze
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  Speaker 1: assets or things like that. But this is not what
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  Speaker 1: we're talking about. This is about the President actually taking
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  Speaker 1: money from the U. S. Treasury that has to be
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  Speaker 1: by law appropriated by Congress and putting it to a
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  Speaker 1: purpose that Congress has said you can't use it for.
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  Speaker 1: And that's that's not covered by any of the emergency
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  Speaker 1: powers accident I'm aware of. I have to wonder what's
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  Speaker 1: the potential liability to President Trump should he go ahead
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  Speaker 1: and declare the emergency powers to seize this cash. I mean,
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  Speaker 1: let's say he says, look politically it looks good for me.
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  Speaker 1: I don't care if it's legal. If it gets shot down,
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  Speaker 1: so be it. Will there be any consequences from that?
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  Speaker 1: That's really the deep question. You know. President Trump, as
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  Speaker 1: you know, has been avoiding the Constitution where he can,
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  Speaker 1: pushing it where possible, and breaking it where he thinks
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  Speaker 1: there's a political advantage to him, and repeatedly the courts
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  Speaker 1: have struck down his actions, and to all intents and purposes,
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  Speaker 1: it seems like he doesn't care, and he may judge
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  Speaker 1: in this instance too, why not just break the Constitution
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  Speaker 1: and then blame the courts and maybe that gives him
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  Speaker 1: some some cover. And you know, at one time I
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  Speaker 1: would have said, we lived in a country where repeated
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  Speaker 1: violations of the Constitution by the president would have effects,
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  Speaker 1: would have blowback, would eventually lead the public to give
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  Speaker 1: up on the president, or would eventually leave Congress to
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  Speaker 1: think about impeaching him. That hasn't happened yet, and so
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  Speaker 1: you know, I'm not gonna sit here and say that
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  Speaker 1: I'm certain that that's going to happen. But I do
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  Speaker 1: believe still that slow, gradual, incremental steps towards realizing that
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  Speaker 1: this is a president who have ignores the Constitution will
• 7:26
  Speaker 1: have a long term negative effect on the presidency, and
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  Speaker 1: they each one incrementally increases the odds of impeachment. What
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  Speaker 1: do you believe the Democrats can do. Well, the first
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  Speaker 1: thing they can do is let it, you know, let
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  Speaker 1: the word ring out loud and clear that this is
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  Speaker 1: not just outside the president's statutory powers, but this violates
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  Speaker 1: the separation of powers. Every American has been through Civics
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  Speaker 1: class and knows that we have the separation of powers
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  Speaker 1: and knows that Congress has the power of the person.
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  Speaker 1: If you take that away, we don't have a democracy anymore.
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  Speaker 1: We don't have a constitutional system anymore. And I think
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  Speaker 1: the Democrats should really beat that point as hard as
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  Speaker 1: they can. I think Americans still believe in the Constitution.
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  Speaker 1: We still believe there should be a Congress, and frankly,
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  Speaker 1: if the president can just allocate my on his own,
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  Speaker 1: it's as though we don't have a Congress, and that's
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  Speaker 1: just not the system that Americans want. So that's the
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  Speaker 1: first thing that Democrats can do, and I think the
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  Speaker 1: second thing they can do is remind the public that
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  Speaker 1: this is a president who's flouting the rule of law
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  Speaker 1: and he's doing it on a daily basis. And last,
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  Speaker 1: but not least, the Democrats will probably have to go
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  Speaker 1: to court to block this. Professor Noah Feldman, thank you
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  Speaker 1: so much for being with us and for your insights.
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  Speaker 1: Professor Noah Feldman of Harvard University is also a Bloomberg
• 8:37
  Speaker 1: Opinion columnist, coming to us from Boston talking about President
• 8:42
  Speaker 1: Trump's efforts to get the appropriations to build the one.
• 9:01
  Speaker 1: The U. S And China are talking and markets like
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  Speaker 1: that they are discussing a trade deal and trying to
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  Speaker 1: get it done within the next few months. Joining us
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  Speaker 1: now to talk about the feasibility if that is. Leland Miller,
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  Speaker 1: chief executive of China beige Book International, joining us here
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  Speaker 1: in our Bloomberg in our active broker studios in New York,
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  Speaker 1: so Leland. Do you think it is likely that the
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  Speaker 1: two sides here will come to some kind of meeting
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  Speaker 1: of minds, And if so, what does that look like?
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  Speaker 1: I do? I think that there are going to have
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  Speaker 1: a trade deal at the end of this ninety days.
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  Speaker 1: I think the way this looks there's that there will
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  Speaker 1: be a framework that's set up um that they'll call
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  Speaker 1: a deal, and then there'll be a hundred eighty days
• 9:36
  Speaker 1: or so implementation period where the Chinese, where the Chinese
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  Speaker 1: do all the things that they're supposed to do, and
• 9:45
  Speaker 1: the U S evaluates where the Chinese have done what
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  Speaker 1: they're supposed to do. And will that conclude the arrangement
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  Speaker 1: or will it just bring more contradiction and more debate.
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  Speaker 1: The idea is it'll solve it. For so what President
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  Speaker 1: Trump would like to do is get this issue out
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  Speaker 1: of his hair, move on to some other trade issues,
• 10:06
  Speaker 1: and solve this up until brings it back. So when
• 10:10
  Speaker 1: during the campaign season you're going to see China being
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  Speaker 1: a major issue, the Democrats are going to bring him up,
• 10:16
  Speaker 1: bring it up his trade deals, his z T E. Tweets,
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  Speaker 1: So is going to be the year that this comes back.
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  Speaker 1: But twenty nineteen, he'd like to take it off the agenda,
• 10:26
  Speaker 1: and that's the goal of getting a deal by by
• 10:28
  Speaker 1: by March one. So basically, no escalating trade, tariff threats, etcetera,
• 10:32
  Speaker 1: come to some kind of peace move forward. Have it
• 10:35
  Speaker 1: not be part of the equation, which raises the question,
• 10:37
  Speaker 1: can we keep blaming the trade tensions for weakness that
• 10:41
  Speaker 1: we're seeing in China because that is what some people
• 10:44
  Speaker 1: are trying to do. What is your view on that? Yeah,
• 10:47
  Speaker 1: that's not accurated. There are definitely parts of the economy
• 10:49
  Speaker 1: that have been suffering quite dramatically. I mean, you look
• 10:51
  Speaker 1: at our manufacturing data. Public data showed export orders weakening.
• 10:56
  Speaker 1: I think it was early October, maybe late September, Yeah,
• 10:59
  Speaker 1: in China August, you know, we we were we were
• 11:01
  Speaker 1: showing this in in August, and so we have seen
• 11:04
  Speaker 1: a dramatic hit to manufacturing for the last several months,
• 11:07
  Speaker 1: no question about that. But overall, the economy was gonna
• 11:10
  Speaker 1: weaken no matter what was done on the trade side,
• 11:13
  Speaker 1: and we had seen in seventeen A lot of people
• 11:16
  Speaker 1: thought this was organic momentum that was pushing us UM
• 11:20
  Speaker 1: into beyond with this was beautiful Chinese growth was actually happening,
• 11:23
  Speaker 1: is it? By mid seventeen, private firms were already getting
• 11:27
  Speaker 1: skeptical of of the rally and we're borrowing less and
• 11:30
  Speaker 1: hiring less and investing less. But state firms, under orders
• 11:33
  Speaker 1: from Beijing, of course, just kept going right straight through,
• 11:36
  Speaker 1: straight through the Party congress Ineen. So you saw this
• 11:40
  Speaker 1: particularly manufacturing and property and commodities, which were the you know,
• 11:43
  Speaker 1: the old economy sectors. So there was an overheating that
• 11:46
  Speaker 1: had to be dealt with and it it was gonna result
• 11:47
  Speaker 1: in the slowdown no matter what. Um. What you had
• 11:50
  Speaker 1: in early eighteen was no doubt, some frontloading of orders
• 11:53
  Speaker 1: in order to get to to to beat the tariffs.
• 11:56
  Speaker 1: So what that meant was things earlier in the year
• 11:59
  Speaker 1: were probably a little bit better here than they would
• 12:00
  Speaker 1: have been otherwise, and it's just pushed the trouble farther
• 12:02
  Speaker 1: into the year. And that's where we are now, and
• 12:04
  Speaker 1: our our que for data is the worst that we've
• 12:06
  Speaker 1: seen since the first quarter of sixteen, when we when
• 12:10
  Speaker 1: we when when China markets were in a panic. We
• 12:14
  Speaker 1: almost the last time you were physically in China it's
• 12:18
  Speaker 1: been it's been um earlier this year. UM, but I
• 12:24
  Speaker 1: haven't spent a lot of time there at all recently. Okay,
• 12:29
  Speaker 1: but you know, there's there's some questions, you know, it's
• 12:33
  Speaker 1: it's a different environment there right now. Well, that's why
• 12:34
  Speaker 1: I wanted you to go, is maybe just expand on that.
• 12:37
  Speaker 1: What are your concerns, what are your personal perspective and
• 12:41
  Speaker 1: experiences tell you. I don't think there's a risk for
• 12:45
  Speaker 1: Americans right now, but the environment is changing. Is the
• 12:47
  Speaker 1: economy slows and we're certainly reporting that the economy slowing,
• 12:51
  Speaker 1: and there's significant tensions over Huawei. The Canadians are seeing that.
• 12:55
  Speaker 1: It's just, you know, I think that you're you're most
• 12:57
  Speaker 1: at risk if you're a big tech CEO in a
• 13:00
  Speaker 1: Canadian tex EO. But I think that it's it just
• 13:03
  Speaker 1: factors into your into your thinking now, whereas last year,
• 13:07
  Speaker 1: past years, no matter whether things were good or bad,
• 13:10
  Speaker 1: you just didn't think about it. So you said that
• 13:11
  Speaker 1: the fourth quarter data was the worst that you've seen
• 13:14
  Speaker 1: since the beginning of Of course, China engaged in a
• 13:18
  Speaker 1: massive stimulus that year, expanded its debtload dramatically in order
• 13:21
  Speaker 1: to prop up the economy cannot do that again. If
• 13:25
  Speaker 1: it absolutely had to, it would go back to the well.
• 13:28
  Speaker 1: But I think what people are making making two mistakes
• 13:30
  Speaker 1: on stimulus. The first is the idea that China is
• 13:33
  Speaker 1: not easing right now and they'll they'll start doing it soon.
• 13:36
  Speaker 1: But if you look at China age book data, we've
• 13:38
  Speaker 1: seen three straight quarters where borrowing numbers have been elevated
• 13:41
  Speaker 1: from sixteen. Firms are borrowing, And what we saw originally
• 13:45
  Speaker 1: was that shadow banking was being shut down, So so
• 13:48
  Speaker 1: firms are being pushed for more on balance sheet lending
• 13:51
  Speaker 1: at banks, but then deleveraging to the extent it ever
• 13:54
  Speaker 1: started uh ended quickly, and now you're seeing the shadow
• 13:57
  Speaker 1: banks lending again, you're seeing banks barring or so there
• 14:00
  Speaker 1: is a lot of clandestine easying going on right now.
• 14:04
  Speaker 1: All our credit indicators in Q four while we're pointed up,
• 14:07
  Speaker 1: the problem is it wasn't resulting in more investment. It
• 14:10
  Speaker 1: was not resulting in boosting growth because firms were overwhelmingly
• 14:14
  Speaker 1: taking that capital and they were battening down the hatches.
• 14:17
  Speaker 1: They were dealing with the cash flow problems and they
• 14:21
  Speaker 1: were really troubled by the uncertainty. So that's something that
• 14:24
  Speaker 1: needs to change if China wants to swing back upwards.
• 14:26
  Speaker 1: If you are a Chinese investor, are you looking to
• 14:31
  Speaker 1: figure out a way to get your money out of China.
• 14:35
  Speaker 1: I think Chinese investors have been trying to do that
• 14:36
  Speaker 1: for years and years, and you're still trying because you know,
• 14:39
  Speaker 1: even if you were convinced the Chinese economy is a
• 14:42
  Speaker 1: wonderful medium term or long term bet, you have to diversify,
• 14:45
  Speaker 1: and the problem that Chinese investors have in the Chinese
• 14:48
  Speaker 1: the problem the Chinese firms have is that they don't
• 14:50
  Speaker 1: have enough options for diverse diversification, which is why they're
• 14:53
  Speaker 1: constantly being shoved into the equities markets, the bond markets,
• 14:56
  Speaker 1: the commodity markets, or property because those are the only
• 14:59
  Speaker 1: places in China you can put your money legally. We
• 15:02
  Speaker 1: were speaking earlier with Victor she, professor of you See
• 15:06
  Speaker 1: San Diego, and he was talking about how they've sort
• 15:08
  Speaker 1: of reached a point of diminishing returns where the more
• 15:11
  Speaker 1: that China borrows, the more of the interest expenses, and
• 15:14
  Speaker 1: they're borrowing to just cover their maintenance payments. Do you
• 15:18
  Speaker 1: agree with that assessment. Yeah, I think Victor's work is
• 15:21
  Speaker 1: is I can't comment on the exact numbers. We don't
• 15:24
  Speaker 1: do that type of of deep diving the debt, but
• 15:26
  Speaker 1: the the idea that China's debt is bigger um than
• 15:30
  Speaker 1: than than people think. I think that's right, and I
• 15:32
  Speaker 1: think that there is causing stresses in the system that
• 15:34
  Speaker 1: aren't immediately apparent and certainly aren't reflected in the public data.
• 15:38
  Speaker 1: So you have a problem. You know. One of the
• 15:40
  Speaker 1: reasons that Lelho and other Chinese policymakers are so against
• 15:45
  Speaker 1: another trip back to the well for more big time
• 15:48
  Speaker 1: monetary stimulus is that they've seen what's happened. They saw
• 15:51
  Speaker 1: what happened in the excesses of UH, They've seen the
• 15:56
  Speaker 1: problems that came from, and they don't think they could
• 15:59
  Speaker 1: do it again. And if they had to do it again,
• 16:01
  Speaker 1: they think it's it's a lot more problems problematic and
• 16:03
  Speaker 1: a lot less bang for the book. What did you
• 16:06
  Speaker 1: make of the recent comments regarding Taiwan from the Chinese leadership.
• 16:11
  Speaker 1: That's interesting. Usually you can expect before Taiwanese election that
• 16:16
  Speaker 1: the Chinese leader will pull out the old Chinese playbook
• 16:19
  Speaker 1: and talk about unification. It is interesting, though, I mean
• 16:22
  Speaker 1: President she is under siege for his handling of trade
• 16:25
  Speaker 1: and the weakening economy, and there are reasons to think
• 16:29
  Speaker 1: that if if if he looks at the United States
• 16:31
  Speaker 1: and he thinks that there's not resolved to defend Taiwan
• 16:35
  Speaker 1: or to defend other US allies, that could be a
• 16:37
  Speaker 1: place where he pushes back UH in order to you know,
• 16:41
  Speaker 1: use the nationalism card back home. It's a worry more
• 16:44
  Speaker 1: now that I would think it's been in the past.
• 16:47
  Speaker 1: Thanks very much for being with us always enlightening. Leland
• 16:49
  Speaker 1: Miller is the chief executive of the China Beije Book International.
• 16:53
  Speaker 1: You can of course follow them as we do on
• 16:55
  Speaker 1: Twitter at China Beije Book. Emerging markets debt has been
• 17:18
  Speaker 1: rallying dramatically in the past two trading sessions along with
• 17:21
  Speaker 1: all risk assets. Enjoining us now to talk about whether
• 17:23
  Speaker 1: this can last is Damian Sasaur, chief Emerging markets credit
• 17:27
  Speaker 1: strategist for Bloomberg Intelligence, joining us here in our interactive
• 17:31
  Speaker 1: Burger Studios. So, Damien, what's your feeling do you feel
• 17:34
  Speaker 1: like this incredible rally, which by on spreads measure, has
• 17:37
  Speaker 1: been the best two day rally, is it sustainable? Well?
• 17:41
  Speaker 1: First of all, happy New Year, and secondly, it's really
• 17:44
  Speaker 1: nice to be here when I'm not talking about emerging
• 17:46
  Speaker 1: markets melting down, So this is something new for me.
• 17:49
  Speaker 1: But um, yeah, no, I mean just in terms of
• 17:51
  Speaker 1: the debt load, the two maturing debt this year, um,
• 17:56
  Speaker 1: coming out of emerging markets dollar debt that is. Yeah. No,
• 17:59
  Speaker 1: I mean, look, we see sovereign issuance improving in the
• 18:01
  Speaker 1: beginning of this year. We see the Philippines and Israel
• 18:03
  Speaker 1: happy markets. Um, that's certainly a changed since the fourth
• 18:06
  Speaker 1: court of last year when really no issuer could come
• 18:09
  Speaker 1: to market. And and look, I mean just given where
• 18:12
  Speaker 1: yields are now and and and and certainly where yields
• 18:14
  Speaker 1: are in China, which we've all discussed. And I know
• 18:16
  Speaker 1: you had a guest on yesterday who was talking to this.
• 18:18
  Speaker 1: You know, China's got a lot of debt out there,
• 18:20
  Speaker 1: and the fact that now they can bring that debt
• 18:22
  Speaker 1: back home into local currency and potentially lower their cost
• 18:24
  Speaker 1: of funds is is actually a bullish thing. So yeah,
• 18:27
  Speaker 1: we're we're we're looking at all of that, and and
• 18:29
  Speaker 1: things are looking a bit rosier than last year. So Damian,
• 18:32
  Speaker 1: this one point to trillion that's gonna be rolled over
• 18:34
  Speaker 1: in China they're gonna find buyers for that, you know,
• 18:37
  Speaker 1: I don't know, you know, I had trouble reconciling that number.
• 18:41
  Speaker 1: Um And you make a great point, you know, how
• 18:42
  Speaker 1: deep and what's the breath of those local markets? You
• 18:45
  Speaker 1: know that hasn't yet been tested, certainly not on that scale.
• 18:48
  Speaker 1: But you know, if you just look at you know,
• 18:49
  Speaker 1: all of the dead outstanding out of China, and I'm
• 18:51
  Speaker 1: talking debt benchmark eligible debt, not just credit because if
• 18:54
  Speaker 1: you kind of look at the there, I guess the
• 18:57
  Speaker 1: big number that the b I S comes out with
• 18:59
  Speaker 1: is that China Credit Global of China GDP. I mean,
• 19:03
  Speaker 1: that's a huge number. They don't need to refinance all
• 19:05
  Speaker 1: of that, and while a lot of that is short term,
• 19:08
  Speaker 1: you know, it's pretty easy to roll it over. Specifically
• 19:10
  Speaker 1: on local currency, we don't see that being a really
• 19:12
  Speaker 1: big issue. I think the real issue are going to
• 19:14
  Speaker 1: be in pockets of that market, specifically in property and
• 19:17
  Speaker 1: specifically in high yield, where a lot of you know,
• 19:20
  Speaker 1: issuers who have poor fundamentals have been able to issue
• 19:24
  Speaker 1: in dollars, have been able to issue locally, and they're
• 19:26
  Speaker 1: gonna have a lot of trouble rolling that debt over all. Right, Well,
• 19:30
  Speaker 1: you were talking about just the general feeling and emerging
• 19:33
  Speaker 1: markets and you're talking about the amount of debt coming.
• 19:35
  Speaker 1: Do that you think we'll have an easier time getting
• 19:38
  Speaker 1: rolled over now that there's a more constructive tone. And
• 19:41
  Speaker 1: I'm just wondering, can you square the idea of a
• 19:43
  Speaker 1: dramatically slowing Chinese economy with ongoing strength in emerging markets?
• 19:48
  Speaker 1: Are these two ideas incompatible? Ah? Yeah, that's that's the question.
• 19:53
  Speaker 1: Right when China catch is called e M sneezes um. Look,
• 19:57
  Speaker 1: you you make a great point, you know. I mean,
• 19:58
  Speaker 1: China has definitely got its issues. Growth is slowing, and
• 20:01
  Speaker 1: I am hard pressed to find a way that they're
• 20:03
  Speaker 1: ever going to get growth, real growth up to a
• 20:05
  Speaker 1: point without really, uh taking on more leverage. And I
• 20:09
  Speaker 1: think there was a real willingness on the part of
• 20:12
  Speaker 1: President she and on the government to really you know,
• 20:14
  Speaker 1: to really focus on the de levering program. But right now,
• 20:17
  Speaker 1: you know, things are tough, there is pain on the ground,
• 20:19
  Speaker 1: and they need to basically grow their economy and they're
• 20:22
  Speaker 1: gonna try and grow the we're out of it using leverage.
• 20:24
  Speaker 1: I think that goes without saying whether or not the
• 20:27
  Speaker 1: market has the stomach to take on that leverage. Whether
• 20:29
  Speaker 1: their buyers for it remains to be seen. But at
• 20:31
  Speaker 1: this stage there's still a lot of you know, um
• 20:34
  Speaker 1: viable assets that are trading at much more attractive levels
• 20:37
  Speaker 1: right now than they were at this time last year,
• 20:39
  Speaker 1: and I think that remains to be seen. You know,
• 20:41
  Speaker 1: you really get some value today where you weren't getting
• 20:43
  Speaker 1: any last year, and I think that's the real change.
• 20:46
  Speaker 1: Is there a dollar squeeze going on? I think there was,
• 20:50
  Speaker 1: you know, and I I I mean my big risk
• 20:52
  Speaker 1: I mean going into you know, the beginning of this
• 20:54
  Speaker 1: year was that you know, liquidity would not return to
• 20:56
  Speaker 1: the US capital markets and that was going to kind
• 20:58
  Speaker 1: of weigh on you know, the emerging markets. But you know,
• 21:01
  Speaker 1: since Chair Power kind of came out and said, you know,
• 21:03
  Speaker 1: the feed is um you know, you know, they had
• 21:06
  Speaker 1: been dismissed on the impact of balance sheet unwind and
• 21:08
  Speaker 1: now they're saying that FET is not on autopilot. You know.
• 21:11
  Speaker 1: I mean, the markets have read patients for a pause,
• 21:13
  Speaker 1: and you know it's and if you're right, and growth
• 21:16
  Speaker 1: is the big concern, that's bullish for bonds. So you
• 21:18
  Speaker 1: may see some bond buyers returning, and you see may
• 21:20
  Speaker 1: see some bond buyers moving out along the curve, taking
• 21:23
  Speaker 1: more duration into the portfolios. You see Goldman saying U
• 21:26
  Speaker 1: S yields of peak. You know, as there's a lot
• 21:28
  Speaker 1: of reason to be bullish this morning, which resions do
• 21:30
  Speaker 1: you think will have the biggest rallies? Okay? So you
• 21:33
  Speaker 1: know it depends. So if we see a deal here
• 21:35
  Speaker 1: in US China on trade, I happen to think the
• 21:38
  Speaker 1: Indian credits are severely undervalued. I'm talking Peru and Chile.
• 21:41
  Speaker 1: I think there's no question about it in global um
• 21:45
  Speaker 1: asset markets. I mean, I can't think of a better
• 21:47
  Speaker 1: way to play a China U S trade deal there.
• 21:50
  Speaker 1: And then if you do believe that the e c
• 21:52
  Speaker 1: B bond buying program is now done finished, some of
• 21:56
  Speaker 1: your safe having credits such as Poland, Hungary and and
• 21:59
  Speaker 1: and the Czech Republic are no longer going to be
• 22:01
  Speaker 1: safe anymore right there, They're gonna be at risk. So
• 22:03
  Speaker 1: so you've got little pockets and little things that are
• 22:05
  Speaker 1: changing around us. And so those are the kind of
• 22:07
  Speaker 1: things that we're looking at. And just finally, just to
• 22:10
  Speaker 1: go back to China for a second, you believe that
• 22:13
  Speaker 1: they're financial I guess you might call it expansion. It's
• 22:18
  Speaker 1: gonna work. You think that they're easing of credit is
• 22:21
  Speaker 1: going to work. So yeah, you know you can offer
• 22:25
  Speaker 1: to lend money, but if no one shows up, yeah, no, no,
• 22:28
  Speaker 1: it's a great point. But you know the reality is
• 22:30
  Speaker 1: people are showing up. You've seen I think they had
• 22:32
  Speaker 1: China Bond just came out with their numbers today. They
• 22:34
  Speaker 1: had the second biggest offshore purchases of local remnimbic denominated
• 22:38
  Speaker 1: debt um last month. And and look, if they are
• 22:41
  Speaker 1: indeed easing rates, you know that is bullish for off
• 22:43
  Speaker 1: shoreholders of of of of one denominated debt. And so yeah,
• 22:46
  Speaker 1: you are seeing dollars flowing in, and so whether or
• 22:50
  Speaker 1: not those dollars gonna be able to flow out remains
• 22:51
  Speaker 1: to be seen though, Thanks very much, Damian sass Our,
• 22:55
  Speaker 1: Chief Emerging market credit strategist for Bloomberg Intelligents. The topic
• 23:18
  Speaker 1: is cannabis. Canada's cannabis shortage could last as long as
• 23:23
  Speaker 1: three years. This according to industry executives, who say production
• 23:28
  Speaker 1: estimates are to Rosie Well. Here to tell us more
• 23:31
  Speaker 1: about the industry is Keith Merker, He is the chief
• 23:34
  Speaker 1: executive of Weed m D and they are traded in Toronto.
• 23:39
  Speaker 1: The symbol there is w m D. He joins us
• 23:43
  Speaker 1: here in studio. Keith, thank you very much for being here.
• 23:46
  Speaker 1: Just tell people exactly what is weed m D and
• 23:50
  Speaker 1: a little bit about how you came to be such
• 23:53
  Speaker 1: a big cultivator of cannabis. You bet, and thanks for
• 23:58
  Speaker 1: having me here today. It's wonderful being in this studio
• 24:00
  Speaker 1: with you folks and chatting about Weed m D and
• 24:03
  Speaker 1: of course the Canadian cannabis and of course the overall
• 24:05
  Speaker 1: cannabis industry. Weed MD has been around since late We
• 24:10
  Speaker 1: were one of the initial applicants under what was then
• 24:13
  Speaker 1: the brand new commercial cannabis industry in Canada. Unfortunately, at
• 24:18
  Speaker 1: the time we were not one of the initial licensees
• 24:20
  Speaker 1: due to a very difficult regime in place at the time,
• 24:23
  Speaker 1: whereby in Canada was much different than what you've seen
• 24:26
  Speaker 1: in the States. Uh the government was dragged really kicking
• 24:30
  Speaker 1: and screaming into a commercial cannabis industry by court dictat
• 24:33
  Speaker 1: in Canada. Uh so came through the legal system versus
• 24:37
  Speaker 1: in the States where you see it coming through either
• 24:38
  Speaker 1: ballot measures or through legislatures on a state level, and
• 24:43
  Speaker 1: so we actually pivoted to the US weed m D
• 24:47
  Speaker 1: was one of the first multi state operators, which is
• 24:50
  Speaker 1: one of the hot button buzzwords that you see out
• 24:52
  Speaker 1: there around the US companies today operating in the cannabis space.
• 24:56
  Speaker 1: And so later in when the government started open up
• 25:00
  Speaker 1: the door again to licenses in Canada, we made the
• 25:03
  Speaker 1: decision at the time to sell off our US assets,
• 25:05
  Speaker 1: moved back to Canada, get our facilities up and running,
• 25:09
  Speaker 1: and we now have what will be one of the
• 25:11
  Speaker 1: largest production platforms online in Canada by you know, later
• 25:15
  Speaker 1: this quarter of twenty nineteen, so Keith Pam was talking
• 25:19
  Speaker 1: about the acute shortage of marijuana that is predicted. Is
• 25:23
  Speaker 1: this due to higher than expected medical demand or higher
• 25:26
  Speaker 1: than expected recreational demand in Canada. It's more so the latter.
• 25:31
  Speaker 1: So we've got a brand new industry that's just come
• 25:34
  Speaker 1: into place on the adult side in Canada, and that's
• 25:37
  Speaker 1: entailed developing a whole brand new supply chain, whereby we
• 25:41
  Speaker 1: had to come up with new packaging, we had to
• 25:43
  Speaker 1: come up with excise tax stamping on all the products
• 25:45
  Speaker 1: that we deliver, and we're delivering now palettes full of
• 25:49
  Speaker 1: cannabis that are packaged and ready for distribution in adult
• 25:52
  Speaker 1: use market versus what was historically a simpler supply chain,
• 25:57
  Speaker 1: let's say, whereby we were shipping directly to patients and
• 26:00
  Speaker 1: Canada from our facilities. So in other words, it results
• 26:03
  Speaker 1: from the legalization of recreational use. Correct, Well, I'm just
• 26:09
  Speaker 1: wondering how much a price is going to go up. Well,
• 26:13
  Speaker 1: the government was very clever in Canada and that what
• 26:16
  Speaker 1: they did is they created a distribution model whereby the
• 26:19
  Speaker 1: provincial typically the liquor agencies across the provinces, would be
• 26:23
  Speaker 1: in charge of distribution and would stand in the middle
• 26:25
  Speaker 1: as a wholesaler to what would then be retailers that
• 26:28
  Speaker 1: would either be privately owned or publicly owned or some hybrid,
• 26:32
  Speaker 1: depending again on the province that they're working in. And
• 26:36
  Speaker 1: so these middlemen were in a position where they could
• 26:40
  Speaker 1: um dictate pricing to some degree and also control that
• 26:45
  Speaker 1: supply chain from that that critical position that they took.
• 26:49
  Speaker 1: And so you know, in an environment where we would
• 26:52
  Speaker 1: be selling directly to a retailer, we could certainly be
• 26:55
  Speaker 1: as a as a cultivator in a better position to
• 26:57
  Speaker 1: command higher pricing. In the situation is today. Um, unfortunately
• 27:01
  Speaker 1: that's not quite the case. To some degree, there is
• 27:05
  Speaker 1: some truth to it. But by and large, by dealing
• 27:08
  Speaker 1: with a single buyer in each province and they're only
• 27:11
  Speaker 1: being a few very large provinces as buyers, it changes
• 27:15
  Speaker 1: that sort of supply demand dynamic. Not because of this
• 27:18
  Speaker 1: current shortage. I understand that Alberta has temporarily stopped issuing
• 27:23
  Speaker 1: licenses retail licenses, and Ontario said it will initially open
• 27:28
  Speaker 1: just twenty five stores, and that's in the most populous
• 27:31
  Speaker 1: province of Canada. Yeah, and so we distribute as WEED
• 27:35
  Speaker 1: m D to both of those provinces today, and they
• 27:38
  Speaker 1: are two of the largest UH provinces by which we'll
• 27:42
  Speaker 1: see demand coming from over time. And you know, in
• 27:45
  Speaker 1: my conversations with both of them, they told me that
• 27:49
  Speaker 1: they received roughly twenty of what they had asked for
• 27:53
  Speaker 1: from the LPs in the early going. Now, not pointy fingers, uh.
• 27:57
  Speaker 1: We MP has always taken a very rational approach to
• 27:59
  Speaker 1: the market. We you know, we're executors. So we've built
• 28:03
  Speaker 1: and retrofitted and ramped up a facility in record time
• 28:06
  Speaker 1: in Canada. As one example, you've got like a hundred
• 28:08
  Speaker 1: and thirty six thousand square feet under cultivation we do today,
• 28:11
  Speaker 1: We'll have five hundred and five fifty thousand plus online
• 28:15
  Speaker 1: later this quarter. So we're furiously executing and retrofitting and working.
• 28:20
  Speaker 1: This is in a great hybrid greenhouse scenario where we're
• 28:22
  Speaker 1: producing grade A product um And you know, we were
• 28:25
  Speaker 1: very careful to make promises that we could keep when
• 28:28
  Speaker 1: it came to dealing with the provincial agencies, which is
• 28:31
  Speaker 1: stands US is in good stead going forward with those
• 28:33
  Speaker 1: relationships that are critical. Unfortunately, many others were let's just
• 28:38
  Speaker 1: say a little bit optimistic with respect to what they
• 28:41
  Speaker 1: could deliver to the provinces on on, you know, as
• 28:45
  Speaker 1: as recreational cannabis rolled out in Canada. You know, I
• 28:48
  Speaker 1: heard you're talking about Fannie Mae and Freddie mac prior
• 28:51
  Speaker 1: to the break that maybe Canada needs to implement some
• 28:53
  Speaker 1: kind of governmental agency to deal with the issue. You
• 28:56
  Speaker 1: could call it Mary Jane. Keith Burker, CEO of Weed
• 29:00
  Speaker 1: Empty with his proposal for Mary Jane a government agency.
• 29:08
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 29:11
  Speaker 1: You can subscribe and listen to interviews at Apple Podcasts,
• 29:14
  Speaker 1: SoundCloud or whatever. Podcast platform you prefer. I'm pim Fox.
• 29:18
  Speaker 1: I'm on Twitter at pim Fox. I'm on Twitter at
• 29:21
  Speaker 1: Lisa Abramo wits one. Before the podcast, you can always
• 29:25
  Speaker 1: catch us worldwide on Bloomberg Radio