Credit Default Market Is Smaller Today, Eisman Says

bank earnings. We had three major banks reporting last week. Two to come tomorrow. We have Goldman, sax and Morgan Stanley as well. Let's just take stock of what we've seen thus far. Earnings have come in line with the expectations. Of course, there's some quirkiness the third quarter earnings as well. What you've been watching is as the bank earnings have been coming in, Um, I've been ignoring them possible for what? For what reason? Do explain that? Completely irrelevant? How self?

You know the bank artians will do whatever they'll be. They're very similar to the second quarter. Um, you know, the analysts will print what they print about who did a little better, who a little, a little little worse as completely meaningless. Because the big story is the deregulatory story, and that's that's going to be coming down the pike over the next six to nine months. Let's stick into

that story a bit. A few months back, the Treasury Department released it's its first round of reports on on regulation, How it sees regulation, what what it intends or hopes to do with regard to to regulation. How clear a message on that front have we gotten from from this administration. We can talk a bit about what Gary Cone had to say over over the weekend, but is there clarity from this administration about how it would like to see that terrain change was It's as clear as day. Um.

You know, I wear two hats. I wear the hat of American American citizen, and this is what I would do if I was God forbidden charge. Um. And then there's the hat of I'm not in charge. And it's very clear to me what the regulators are gonna do. What does that mean for bank stocks? I mean, if I was in charge, I would change very little. But

I'm not in charge. And as as it is very obvious, um, And this is an administration that comes up with excuse after excuse about why Dodd Frank is bad, and they are not gonna be able to change, actually change Dodd Frank from a legislative perspective. So they're going to do it through the back door, through the regulatory process, because you know, Dodd Frank leaves a lot of them for interpretation. Um. You know, the prior regime under the OBAA administration was

very very strict about the banks. They took leverage down enormously. They interpreted the vocal rule extremely strictly. Um, And you're going to see a partial reversal of what has happened. We're not gonna go anywhere close to where we were pre crisis. You know. Just to give you a couple of numbers, City Group used to be levered thirty three

to one. Today it's levered ten to one. You know, my expectations over the next few years maybe it goes to thirteen fourteen to one, which would not be a calamity, um, but it would certainly make City Group a lot more profitable. And that's the direction we're gonna go in. It's going to happen in a very bureaucratese technocratic, complicated ways. So it's gonna be very hard for UM politicians to complain about it because they won't understand it. And that's intentional. Yeah,

how how quickly can that happen? I look at the way that Dodd Frank came into being. Having lived in Washington, I for a time was noting the thousands and thousands of pages of comments letter implementing these rules, going from draft to draft to draft to final rule took a lot of time. If there is a lot of bureacrats, as you put it, does does that slow down the process at all? Help quickly in this come into play? Um, it will start to happen very quickly, but it's going

to take about four years to actually happen. And what I mean by that is the FED regulates the banks to the annual stress test. Um, let's just say I think that's starting next year, they're going to grade on an easier curve, and so you will see a higher percentage of stock buy back and you'll see but but they're not going to let the banks buy back of

them income. You know, this year, y, you're able to buy back a next year, I think there'll there'll be something like so leverls are gonna start to inch up, emphasis on inch, so you know it's going to take about a three or four years to to sort of move the leverage anywhere in any meaningful sense. Do we understand how big the banks are? One of the things I found over the years in the media is there's a complete misunderstanding of the scope and scale of these beasts.

Revenue for JP Morgan Bill, revenue for City Group seventy billion, operating income twenty three plus thirty four. Between the two of them, they have something like fifty seven billion dollars of operating income down income statement, is that your advantage as an investor? Because we really don't understand the sheer mass of these beasts. I don't know if that's you know, people like to focus on that a lot um. You know,

they're big because the economy is really big. I mean, so I don't pay all that much attention to it. You know. One of the reasons why the big banks are so big today is that during the height of the crisis um the regulators basically begged some of the larger banks to buy some of the other institutions. So Well's Fogleboat, Wacovia, um, you know, on and on and on. JP Morgan is bigger because of what bear Sterns and Carebuich other institution it boy, but it port something else. Um,

so they were sort of stuck with it. But I don't focus all that much on the size issue. I focus much more on the leverage issue. Are we gonna see our regional bank mergers? I think if we do, you're gonna have to first. So the stress test starts at fifty billion in assets, So anybody in the stress

test but meaning fifty billion up ain't merging. My expectation is that that level, that number will probably go up to something like two hundred billion, and when that happens, you'll begin to see some mergers or some some fairly significant size bags. But that's the first thing that has to happen. And to give you an idea of a fifty billion in the path, the two billion David City groups total assets are one thousand, eight hundred eight nine

billion versus two. Again, the size issue is huge. I know that you and Tom we're talking on TV about these comments that Garry Cone made over the weekend at this Group of thirty confab in Washington, d C. He sounded declarion about clearing. He thought that that's particularly risky

at this point. A couple of weeks back, we had the new chairman of the CFTC sitting in the seat you're sitting in now, and he painted a fairly rosy picture of his institution in the work that it's doing, while commenting on the size, the immense size of the derivatives marketplace. How at risk is that apparatus, that regulatory apparatus, and how far have we come from the financial crisis to now in terms of the power imbued into the CFTC. And it's it's ability to regulate that that massive space,

you know, it's this is not my area of actorities. UM. You know, I think the derivative market is safer today than it was, you know, the derivatives that you know, lots of different kinds of derivatives. As there's interest rate swaps, which I don't think anybody really has a problem with. UM. The area that was that was the problems credit to fault swaps. That's a lot smaller to say than it was.

I I gave an example UM in two thousand and sixteen, between the end of January and February, the credit to fould swap spreads on Deutsche Bank went from a hundred basis points to three hundred basis points and people started to freak out about that because that's an awfully big move and reminded people of the crisis a little bit.

And what they didn't know at the time was that the volume that was traded on that huge move was seventy five million dollars now and during pre crisis on such a move, the amount that would have been traded would have been ten billion dollars. So it just gives you an idea of how much smaller than the credit to fuld s market is today. Stee, thanks for the visit, Steve icewand with this new today as we look at

bond markets and make note of his optimism. Overall his optimism, he also did not mention when Selena Gomez will appear with us to speak about Richard Taylor. And to that reply on Twitter, Aty reached out talked to people. Effort was she's a busy touring schedule. I was looking up Oklahoma here David grew up and the presidential vote, Pama yes, and then I present Secretary Clinton got twenty nine percent of the vote, which the President got six of the vote and Mr Johnson of the l Party got six

percent of the vote. But I find it interesting that Secretary Clinton got less than thirty percent of the vote. I did not know that he could bring in now the former U. S. Senator from Oklahoma. He's here to a decade in the U S. Senate, medical doctor turned congressman, then Senator Tom Coburan joining us now on our phone lines.

Tom quickly before I bring in the senator. One of my favorite things about him was in two thousand and fifteen, as his retirement date approached, he could tick off how many days he had left until he was able to leave the capital. A complex. Great to speak you this morning, Senator Cobourn. And let me ask you, as you've observed Washington since you left, over these last two years, how much has has changed? How much is the story of dysfunction of government in action the same as it was

when you left in two thousand fifteen. Oh, I think it's the same. The last two years that I was in the Senate, there were seven amendments that were considered on the floor. Uh, I mean, you know, and I had several of those. Actually that was the last year. The year before that, I think there were twelve. So the Senate had been shut down by Harry Reid because

they didn't want to take hard votes. Uh. And so it's a disease that both Republicans and the Democrats have is the next election is more important than the future of our country. And there are exceptions to that in both parties, but by and large, the vast majority of career politicians are more interested in the next election than

there are in terms of fixing problems. And the reason what you even know that is who's working on the medicure default that's coming, or the SOB security default that's coming, or the SOB security disabilities already defaulted and we're stealing from regular social security. Now, who's working on those things? Nobody? And so it means what they're doing is short term thinking, uh, that is politically beneficial to one party or the other, and in the long run, all the rest of America,

no matter which party is, loses. And that's why I left. Nothing was happening there that was going to fix the real diseases, the real disease of our country, which is we're spending money we don't have. We promised benefits that we can't pay, and nobody wants to fess up and start addressing man. How much of this is the responsibility of leadership? You mentioned that Senator read there if you

moments ago. Now, Mitch McConnell's in office, and in these recent days we fre from a number of conservative groups saying he needs to go. The Republican Party in the Senate shouldn't be led by by Senator Mitch McConnell. It's time for some some new blood, some new leadership. How confident are you that if he were to leave, if somebody knew where to lead the party in the Senate, we might see some of the changes you describe. I'm not I'm not confident of that. I'm not sure. You know.

I would tell you that the vast majority of the Senate this career politicians. That's what they went into. I mean, they may have some limitsed work to experience very early in their careers, but most of them that's all I've ever done. So I'm not certain that will happen. I think you know, we're we're divided geographically, were divided, uh socially, were divided fiscally. Uh. People who pay a small amount

of tax thinks their taxes are too high. People who pay a whole lot of tax I think their taxes are too high. But nobody's asking the question, what's the acts that's gonna come on our children and grandchildren by they're in action right now, so there's going to be It's amazing at the amount. You know, it's a hundred and twenty four threion dollars of unfunded liabilities it's going

to be due over the next fifty years. Well, Senator, I think one of the great things about you, in an oddity and rarity among human conditions, including our lovelies on Capitol Hill, is the idea you went back and got a medical degree at age thirty five? Is that right? Yeah? I mean that's something I think a lot of people look at and are you kidding me? That's just outstanding.

Where where do we go to get to compromise needed for these big pieces of legislation right now Monday morning, we're looking at the failure in AFTA, We're looking at some form of regurgitation of the Affordable Care Act, and the mystery attacks reform and and the nation all of our listeners of all political persuasions are begging, begging for doers like you are they left standing on Capitol Hill. No, I healthcare is going to fix itself, and that's because

greed conquerors technologic difficulties. And what we know is one out every three dollars spent in healthcare today doesn't help anybody, doesn't prevent him from getting well then, but doesn't prevent him from getting sick, and doesn't cure him when once they are. So that's about one point three trillion dollars. And the one thing that's never happened since before World War Two is we've never had real market forces working

because there's been no price discovery. And so one of the things I would suggest, if the Congress is gonna do anything, just mandate price transparency everywhere. And well, did you laud the President for pushing this Debate Act to people like you? Sure? Look, I travel around talking about

this all the time. I know a company in Tulsa, Oklahoma is saving a quarter of a million dollars a month right now, just based on price transparency, based on an app that somebody developed to give them price transparency for their employees. And so so you know, that's that's

three million bucks a year in their healthcare costs. And so what my experience, tom is I delivered about Oh, I don't know how many hundred Amish babies and took care of Amish families, and they always bought health care about thirty or five or less than everybody else because

they went and found out prices before they bought. And so if we would just have price transparency all of a sudden, you know, Working's put out of an article in late April about the lack of competition of the large hospital chains and how they increased the cost and how we ought to have a significant antitrust activity going after the large both nonprofit and profit based hospitals and what that would do. The Federal Trade Commission has said the best care in the country at the lowest prices

the position to owned hospitals. They've been banned under the Affordable CARA. I mean, let's let markets work, and if we would, then what we would start seeing as ways for people to figure out how to buy it cheaper. What do you and we need a safety that I'm not benign that we need safety that we can do that, but we don't you know. What we need is the prices to come down, and transparency in terms of price

discovery will force a lot of that. What do you say to the individual who has been relying on those cost sharing steps these we see the President kicking this over to Congress. It's up to them now whether or not to appropriate that money. But there's some concern that's not going to happen. You describe the inaction on the Capitol Hill. Uh. Is that person not imperiled by what's happened here? Yes, they are. But here here's a couple of things that are happening. Number one is they can

lower their cost by raising their deductible even further. And if you had price discovery, most of that expense isn't going to be paid. Uh. They'll give you example that the typical hospital based m r I for the spine is about four thousand bucks. In a free standing clinic that does imaging it's about five So you see in about seven to eightfold increasing costs. So if in fact they could actually see what things cost, they're out of pocket.

The other thing that's happening is direct primary care UM and David. The direct primary care for a family of four is about twenty dollars a year. That's everything except your hospitalization. So let them buy it. Let them buy a hospitalization only policy, and that's about half of what the average deductible is today, and they're well on their way to getting the preventative care shots, immunizations, getting stitched up,

getting broken arm thing. In other words, market will work if we will allow and then we can create a real safety for those that don't have the mean. But remember this promise on Medicaid didn't gonna last because we're not gonna have money to make it last. One final question, if we could, senor very quickly here, how is the support for the president and the President's Oklahoma? Is the support us? It's solid, No, I think it's what he's done is created a real division of between what he

says and what the press says. And of course most of the time they don't believe the press. I'm not sure they all the time they believe him, but I would tell you kind of throughout the country, what you see is those people who voted for him, even though at times they're embarrassed, they're still like the things that the good Senator from Oklahoma heard Tom's talk of the sooner has agreed to stay with us here for another block on for surveillance. Senator Tom Coping before we send

Tom Coping with us on our phone lines. And I know you're on the Homeland Security Committee, Senator when you're when you're in the in the Senate, and I wanted to ask you just how you've observed the fallout from these storms in the Caribbean and UH and and what you make of the government response so far the present. Now nominating somebody intending to nominate somebody to be the

next Secretary of Homeland Security. Well, I think that you know, they learned from the large tragedy in the previous Houston and New Orleans UH hurricane. The problem in Puerto Rico really wasn't getting the stuff there, it was getting it distributed once it got there, UH. And they just weren't capable drivers evidently to do it. But I think overall I get Homeland Security a good writing on how they responded, how they pre staged things knowing that was coming, and

how they how they've got it dispensed. There's a long time to go, a long way to go with both Houston and UH, the Southern Florida and uh Puerto Rico. But overall, I think you know, those aren't easy things. Government sometimes has tasked to do things that are very very difficult. Something that that appears to be very difficult has been the relationship with between the Congress and the

president over these last a few months. And I know that you enjoyed a fairly good relationship with the previous sit president. What what advice would you give this current president about working how to work with Congress? How do you make that relationship better? Is it piecemeal? Let's it go into the golf course one by one with with members of the senatories. There are a better way to

understand how each of these institutions works and should work together. Well, I you know, I first of all, Donald Trump is a very complex, complicated guy, and uh it doesn't look like he's gonna learning theory, doesn't appreciate appear to work with him in terms of he does something good and then steps on it, does something good and steps on it. Uh So I'm not sure. I think you just kind of got to take you Here's here's a guy that's gonna pop off and probably not smartly, but still does it.

And it seems to recover from his base anyway. When he does it, you know, I look deference and keeping your mouth shut is oftentimes I had the feel a problem with that myself, by the way. Uh, but you know, the real question is what are people's motives? And when you get into question the motives, then what your assumption is is, uh, you're you don't have that same motive. And I'd say most people have well are well intentioned.

In the Congress, sometimes their politics gets in the way of that, and I think you know what you do is you count to ten before you react. And we haven't seen that much either from the President or other people that he's talking to. Does Oklahoma? Does Oklahoma have a sanctuary city? Not that I'm aware of. Yeah, I was gonna say they don't. How do we get your part of the your neck of the woods back together with other necks of the woods identified by sanctuary cities.

How do we tom That's a great question. Uh. There, But they're not looking at the real disease. They're looking at the symptoms. Uh. The disease is rule of the law. And what people in Oklahoma said, we're not anti Hispanic, we're not anti anybody. But if you have a law, either change it and don't enforce it to eliminate it, but if it's on the books, enforce it. And the former President Obama was really bad about that. He they deferred on a lot of things that were not legal,

they just didn't enforce them. And so what happened was is you got this big upright. I'll never forget the first time I ran for the Senate, one of the things I've heard the most was why didn't the rule of law being enforced? Because here's what ultimately happens. When the average Americans sees that the federal government doesn't enforce the laws that are on the book, then all of a sudden they start applying that themselves. Well it doesn't apply to them, then then these laws don't apply to me,

and you have this breakdown. And it's one of the key things that allows the republic to a vibe is competence and the rule of law. So it's it's not you know, it's not an issue of race. It's an issue I think that's the problem. Would you suggest that your competition, the Democratic Party, will come up with a new Democrat Party that will tilt back towards the center and so many suggests will happen. Well, I think both

need to do that a little bit. I think they need to come back with the realization that, you know, the Bernie Sanders movement, who's going to pay for the student loans in medicare for everybody? But I mean, you know, it's a pipe drink. It's not out there. The capability to fund that in there. So you can think that, oh, this is wonderful, but the reality is, we can't do that, and the markets aren't going to let us do that. The markets are barely letting us do what we're doing now.

And when we get back to normal interest rates on our dead you know, our desk, it's going to skyrocket. And you know what, three interest rates coming next year and one more this year. And we're so short term financed in terms of our our bar and as a country, ultimately we're gonna get bitten by the and so you know, the Kents also need to compromise. You know, the Senate was designed to force compromise. That's what the Philip was all about. Let's sleep with their Sunday. We're gonna have

to cut you off, thank you so much. The former Senator of Oklahoma, Mr Coburn, he notes Sooner's twenty nine Longhorns. This is Bloomberg. I'm looking at Eco go on the Bloomberg time. I see the Empire Manufacturing Index out this morning coming and higher than expectations thirty point to survey twenty point four. Help me make some sense of this, and then we can get near Dwight. And it's really

good to dearman Barbish this. Let me describe the chart and I will put this out on uh on on Twitter for all of you Bloomberg Radio seeing it first, and you know, I gotta say, folks, it's to me a tertiary data point. It's like me too, and every single bank has to do this. I believe they do it out of Buffalo for the New York FED. But the answer is it's got a lot of information to it. It is solid through two standard deviations going back fifteen years.

It's the first time it's ever done that, which is a good reason to bring in Neriman Barbish, always an optimist with HS Global Insight. They did terrific uh work, Neriman. I mean I don't really I I don't say that often, no, but that I've got a series back fifteen years. That's two standard deviations optimistic. Is the FED behind I I don't think so, Tom. I think I mean, this is just sort of corroborates other data that we have that

suggests that the economy is on very solid footing. So I think this is I don't you know, we can debate about the pluses and minuses of various indicators, but I think they're all pointing in the same direction, and I think that's where the Fed's coming from. In the end. Is it behind? You know, I don't think sup. Until recently, remember, we were all worried about, you know, the strength of its recovery, but all of a sudden, it's starting to

look like it's it's doing fairly well. So no, I don't think that's a fair assessment of where that F is. I mean, we're not back to the high seen in two thousand four David Gura, but we're getting there rapidly. I mean, it's been on a diffusion index basis around zero. We've gone from minus eighteen to plus thirty, which is

a whole move nearon. Let me ask you what you heard from the chorus of policymakers and bankers who were gathered in Washington last week, and over the weekend we had even as we've been discussing the IMF World Bank annual meetings, there the Group of thirty banking for room as well. What's the what are the themes that you

pulled out of those meetings? Well, I read a very interesting piece on Bloomberg this morning that suggested there was a split in this conference that the US policy makers and US bankers were fairly optimistic, whereas European policy makers and bankers who are much more cautious. And I think that says something We've been We've been doing much better than Europe for a sustained period of time, although we've had our ups and downs, no question about it was

Europe is still struggling to some extent. Their banks are not as good shape as US banks, and so so there is a sort of split, if you will. The Europeans worried as probably the way to say it, and some of it because of political developments in in in the past few days, having to do with Austrian the Austrian election and so on, Catalonia, whereas in the US, even though you know there has been a lot of political uncertainty the senses that the economy, the banking sector

are all doing fairly well. This what's going on in Washington, So quite a difference in mood here. Yeah, David Gard mentioned Catherine Man, the O E c D. Said, yes, she understood the optimism, and it's something that they bring into their O E c D report in Paris. But she was very cautious about all, you know, all multizing and the idea of the cliche of an escape velocity

has been had. She really pushed against the near and how much of of of that change in sentiment or bifurcation of Senate has to do with the regulatory landscape in each of these two places. Do do you think that there is a broadly speaking more optimism about the regulatory landscape here in the US then in Europe? You know, David,

I think that is a factor, There's no question. And I think bankers and other industries in the US are feeling that the UH they will be facing a friendly or business friendly or regulatory environment in the next few years compared with the last few years, whereas in Europe, I think they set of the march towards greater regulation is with unrelenting um so I think that is definitely

a factor. But I think, especially given that this was a gathering of financiers and bankers, the health of the US banking system is much better than the health of the European banking system. Near an update your view on investment in the next year, do we actually finally get a list in corporate investment? I think the answer is a cautious yes. And the reason is that global growth is strong now, stronger than it was a while ago.

The dollar has lost some of its strength, It's come down a bit, although in just the last few days it's gone up a little bit. And so that combination will will provide a couple of things. One is it will make overseas profits of US companies UH greater value m but but that it also provides an incentive for companies to invest to meet foreign demand as well as domestic demands. So our view is those two alone, aside from the internal dynamics of the US, will help the

capital spending picture brighten a little bit. Now. I don't want to get too carried away with the optimism, but um, but hey, as you said at the beginning, I'm a half glass of halfus. But but but I think there are a number of key factors that will drive a little better story on capitalist Let's do this. Let's come back and be totally gloomy with their parish of hs as we consider where we are in this economy, and of course all of this front and center for the

FED calendar. Here on the middle of October, I should say, six weeks away November one. Basically, Uh, David, I'm going to say at this point in non event, I'd love for that to change December, as we're all eyes are directed as well, and so good. Two meetings to meetings. The next meeting is uh, what it's the It's Halloween, isn't it? I believe the next November, Lewyn, Yeah, I'm working on my William mac chesney Martin Halloween all sat

Janet as we call that what I should say. What a joy to see Stan Fisher at the IMF meetings, his final weekend as vice Chairman of the Federal Reserve System. This is Bloomberg. It is good to speak to Neriman Bearish middle of October, setting up for the end of the year and in the next year. He's with I h S. What I love about I h S is they usually have three frameworks. Their center tendency they're optimistic Nerriman, bearish tendency, and then the gloom tendency wrought by those

worried and worried. He is three percent run rate g d P and any of your three tendencies Nerriman, Well, the answer is yes in the sense that briefly, if there is a fair amount of stimulus that comes out of Washington. I don't only give that about probability, but if it comes out of Washington, and if it if it's signed in a way that helps infrastructure, it helps capital spending, uh, you know, grow at at a rapid pace, then we could get to three. Probably not on a

sustained basis, but but for a few quarters. I think that's very much in the car. But there's a big provisor if we get the right kind of stimulus, if we get the right kind of tax cut. And what what does that look like to you? What is the right kind of stimulus, the right kind of of tax cut is it? Is it anything like what's being bandied about in Washington today. Well, as you well know, it quickly gets political. I think in the end, you know

what's really required. You know, as we were talking about in the prior segment, what's really missing been missing in this recovery is capital spending. You know, the consumers doing isn't her part. The capital spending has been very disappointing in many respects, and in particular spending on all this

new technology that's being developed. So, you know, my hope would be the kind of investment uh encouraging enhancing policies via the tax code and via other kinds of provisions that might uh in fact bring about this uh sort of unleashing of animal spirits, unleashing of the desire on the part of businesses to invest, an investment in particular in a lot of these new technologies. What we've been seeing is the tech sector is doing really well. I mean,

the sense of productivity growth is good. They're you know, they're investing in all these new technologies. The rest of the economy, which is by far the biggest part in terms of businesses, has not been And that's really what

we want to change here. And I'm detected here over these last few weeks, even maybe maybe a few months, last few weeks, more conversation about the role that technology is playing here are we are we seeing a seat change moment here when policymakers are beginning to wrestle with the kind of technological change you're describing, well, I think the answer is yes, some of it is positive, some

of it is negative. I mean, I think there is a concern rising in many quarters that the technology is playing a bigger role but also has a bigger responsibility in terms of you know, the news aspects or faith news aspects, in terms of you know, making sure that we're not quash squashing competition. A lot of worries about the size of some of these companies. So I think, I mean, the technology plays a big role in the

tech sector. I'm a big fan of the tech sector, and yet you know, we have to start to look at some of these issues because they are somewhat troubling. Yeah, and there, I mean, I look at productivity in the in the overlay of it and all arranging debates. It's something folks are really focusing on. As the beginner of coverage towards Davos in the World Economic Forum. What part of the productivity mix has your attention is ending at all? Including the new FED chairman. Hope The hope is the

word I use hope that productivity lifts. Well, there's no question that we all hope productivity will lift, and it clearly plays a big role in terms of the overall growth and long term growth of the economy. And it matters to the FED a huge amount of the said, it's done a lot of studies on this very topic over the last ten twenty years, you know, while Greenspan was there after he left, and also on UM so

this is crucial. Now. How much the Fed itself can do uh is really questionable in the sense that the interest rate policy alone will not do it. A lot depends on the economic environment, a lot depends on tax policy, a lot depends on uncertainty. And this is the uncertainty factor, which I think is a is a big deal. Policy uncertainty, especially fiscal policy uncertainty, I'm convinced, has had a very

negative repect on capital spending. This is interesting you you you would wait policy uncertainty is businessmen wait to see what's going on in Washington, and you fold that right into the productivity calculation. I think it is definitely a part of it. I'm not saying it's the reason. I'm

all I'm saying is right now. It is a factor because businesses, partly because of you know, the big recession we went through a few years ago, but also partly because of a lot of toing and throwing on fiscal policy, have been rather cautious in terms of what they do. They're not sure for examples environment that go with that. But isn't the CFO of a company a lot more concerned about the artificial construct known as a yield curve? Now,

there's there's no question that financing is crucial here. But but but but bear with me, Tom is you know, the interest rates are very low right now, and even if they're going to go up a little bit next year, the financing environment is going to remain quite friendly for a lot of companies. So the question is, so why aren't they spending like Gangbus? And I have to believe there are other factors at play here, and I think I think the policy environment, fiscal policy environment is partly

to blame. I don't I don't want to over emphasize that this thing is partly to blame. Let's look ahead of here to to do that is mentioned you're out with your your new outlook looking ahead to two thousand to eighteen. How does the consumer look at this point and how much of the health of the U. S. Economy is balanced on his shoulders at this point. Well, as we were saying earlier, the consumer is crucial here

of the economy. Good news is things are going well. Uh. Income growth has been decent, Jobs growth has been decent. A lot of households have seen their net worth rise, not just because of the stock market, because the house price is rising. Uh. And if you look at the confidence surveys and consumers buy and large, yeah, it moves up and down month to month. The buy and large they're feeling pretty good about things. So this is good.

And I don't see that changing radically in the next year or two unless inflation takes off or and the FET has to really step on the brakes very hard. So the good news is, I think the consumers. So there is the bedrock basically of the of the U. S. Economy, and and that foundation right now it's pretty solid. I'll ask you lastly here just about the dollar and dollar weakness and the role that's playing in your forecast as

you look ahead to two thousand eight. Do you have a clear sense of what this administration's dollar policy is and do you think we're going to see sustain weakness in a In a word, no, I don't. I don't have a good sense of where this administration is coming from, because they've they've blown kind of hot and cold a little bit on this. I think in the end they wouldn't mind seeing the dollar a little bit weaker because it will serve help exports, it will help narrow the

trade deficits in the United States. But again, there's not a lot that either the Fed or the Treasury can do about the dollars. The dollars very much market driven. Unlike other economies like China's, we don't control our currency, so we have to live with the the ups and downs in the market. And up until very recently, people were dollar bullish, but then they turned a little bit, partly because of the strong growth overseas. People started shoot their focus to other parts of the world, so the

dollar weakens. That was a miscall the summer by so many people, and of course as we wander into a seventy or eighty degree autumn, we keep waiting for the turn dollars stronger. Here Over the recent days, the d X y one nine shows that one week two week dollar strengths we've seen Nerman BEARVERSH. Thank you so much, David. That was great. He's without HS. I should say that's great. I mean, just to pars Away. You can't do that enough, don't. You can do it all the time, but you gotta

keep your eye on the basic economy dynamics. And I don't have a strong view three two point eight percent. We'll have to see that. The empire statistic that David Gura mentioned earlier was buoyant to say that least. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you refer. I'm on Twitter at Tom Keene David Gura. Is that David Gura before the podcast? You can always

catch us worldwide. I'm Bloomberg Radio.