OPEC's Influence Is No More, Weinberg Says

and of course, on the Bloomberg. Carl Weinberg is the founder of in the chief economist at High Frequency Economics. He's here in our bloombergod leveming three studios. It's great to see you as always. Let's start with the data this week. What you're looking for especially, I mean industrial production tomorrow, Matt. And that's a big one you'll be paying attention to this week. Yeah, I mean, we think the industrial production number is probably going to turn out

okay based on the surveys that we're seeing. You know, the economy is chugging along. You know, we're not going to see any great numbers out of industrial production though. Um. You know we're looking about maybe seven tenths of a percent for the month. At high frequency, that's a little

bit more than the consensus. Uh. But overall, you know, the economic growth numbers are not going to knock anybody's socks off anytime soon, as we're only looking for about you know, two plus percent growth for the year, and that's not going to be a scary number for most people. We have the House of Representatives back in session in Washington at d C this week. They were off last week, the Senate was there. They were not what's your sense

of what's happening in Washington right now? The degree which that's that's influencing the direction of this economy in the US. Wow, Well, you know, I don't really know exactly how to go at that answer, you know, without going getting into the politics of it. You know, the Commey affair has turned

into a big distraction. And we had been skeptical at High Frequency Economics about the prospects for a lot of fiscal stimulus to begin with, for a really strong tax reform package to begin with, and now with all of these distractions, were even more skeptical. So work in the process of marking down you know, it only takes a tenth of a percent or two tenths off of GDP growth. But when you're only growing on two and a half percent, you can't really afford to lose a lot of it.

And we think we might see a little bit of tax cuts coming up, but no major tax reform as anybody had hoped for, and not the big, not very little of the big infrastructure spending that people have been looking for just a few months ago. What's distracting the Fed Reserve right now is they push your head to their next meeting and they're looking at all of the data that we've gotten recently in the data will get

here before they gather again in the equals building. What's what's preoccupying them, Well, their eyes are crossed right now. You know, they're looking at, you know, a lot of inconsistencies. They're looking at, you know, an unemployment rate that's at their level of nairo They're looking at inflation numbers that aren't delivering the inflation that you would expect to see. And they're looking at an economy that should be growing even though you know, interest rates are down at zero

right now. So they are walking a lot of different things. I think that core belief is that at the end of the day, the laws of supply and demand haven't been repealed, that their job is to protect the country from the worst possible outcome, which, given their mandate, is not a recession as much as it is an overshoot of inflation. So with rising risks of inflation on the horizon, we think they're going to be responding to reducing this

chance of the worst possible outcome given their mandate. Oh yeah, back in the nearest students, I remember where the red buttons. There's a guy to my right, Good morning, sir. Yeah. It is one of the great early successes of Boston Biotechnology, Thermo Fishers Scientific Certific. It's fifty five thou employees out of Scenic Waltham, Massachusetts, and they've got themselves a new transaction.

It's a seven billion dollar deal to billion Dad. It's not that big, but it's just what Thermo Fisher has done, Thermo Scientific has done. David Gura for years. I remember that. I was like, who are these guys? Who are these guys? And they have just built and built and built this thing forever. Thermo Fisher takes up Pathion as well. Seven billion dollars um David, you know, it's good to be here. It's nice to have a global cyber attack. So we

got something to talk about besides the administration. What did you come back? You came back Friday right after the show. British Airways did it right actually, and what what was sad was the pilots actually listened to us. I met the pilots and they did the one of those YouTube landings JFK. They came in a little bit sideways in the pouring rain, and then we thank them for landing the beast on the ground. Carl Weinberg knows about sheer.

There's wind shear within the economy. Where's the risk now for the U. S. Economy? Is it a lack of investment? Is it this this colossal reality we may not get wage growth? What's the wind shear out there for this economy? You know, I am a pilot and I can explain that that crooked landing to you. We were doing it. We're we're looking at Connecticut when we landed in great detail.

You know the risk of the U. S. Economy? I think, first of all, from I'm the international guidet high frequency economics, so I look overseas, you know, and we're looking at a world where the I m S forecast of accelerating growth just isn't happening. And most of their hopes at the i m F annual meetings for an acceleration of world growth over the next two years was that the emerging world was going to pick up the pace. And they're growing their bigger share of world GDP now, so

they matter and they do. But now with commodity prices on the down swing, and I don't consider fifty fifty two dollars in oil barrels being an upswing, I considered to be a down swing, we're seeing their incomes being trimmed again. That's a hit to world trade, that's a hit to their ability to import, and that's a hit to our ability to x sport. So to me, the from the international guy at High Frequency Economics, to me, that's where the biggest threats are right now. Help us

understand what's going on with with OLPEC. We saw I take up a little bit, could be the broader downturn you're talking about gently, but did see oil prices move on on reports that there was going to be an agreement, perhaps a longer agreement than was expected to extend the production cuts. What what's the influence that that OPEC plays

right now in oil oil prices? Well, the influence that OLPEX plays right now is that they have don't have an influence, and that their ability to influence prices is increasingly decreasing with the rise of not just shell oil producers in the United States, but emerging market oil everywhere. You know, there are now a much smaller part of the world or oil market than they were in the

nineteen seventies. And the adaptation or the consequence of that is that with everybody pumping the stuff up, there's more supply than demand. Uh. The OLPEC ministers talk about getting inventories back down to the levels of the last five years, but that's the wrong bar. Oil prices have tumbled over the last five years, hitting that bar. The real metric

is that pair to the last twenty years average. Always see the inventories are over their normal range for twenty years by ten days of supply, that's half a billion

barrels of oil for to come to market. And if they're a deal between Russia and Saudi Arabia manages to keep you know, a million barrels a day off of the market was still more than a year away from just getting inventories back down to normal, and their deal probably doesn't make even that much of a difference because everybody ramped the production beforehand to come back with Carl Weinberger US. Right now, we speak with Commander Weinberg on

runway component thrust vector. Captain Weinberg, excuse me, Captain Weinberg, and they and they crab the crab the airplane. That's right. What does that mean? It means that they turn the airplane into the wind so that it tracts along the runway and then at the last minute they straighten it out so that it hits with the wheels pointing down the runway instead of towards the terminal too soon, so you go off the runway. Do they do They do

it manually like a big plane, like a seven. I would say the odds of them flying it manually would be very low. It would depend on the currency of the captain who has to do certain number of medical landings. But for the most part they depend on the machines. The machines are so much better, and the machines do that tilting into the wind. The technology on these aircraft, these air busses and these bowing airplanes are just absolutely incredible. Auto land is what it's called. How many how many

degrees do they go when they crab? It depends on it's well, if you were landing in a forty knot wind, it wouldn't be quite as much as that, but it might be substantial. But the planes coming in at a hundred and forty knots and if they have a ten or fifteen not cross wind component, they're probably not going to have to crab all that much. Why I mean, this is why we love to have these guests on

driving planes. Driving planes. Yeah, that's the future. Now, I don't think so Tom could land one of these planes, that's what you're saying. No, my wife says that in our plane, that the way that I fly as I push buttons until it does what I wanted to do. And that's more or less what these guys on the big planes they do. I feel like I'm with hap Arnold or something. This is the founder of American aviation. Do you know David girl hap Arnold His first flight

was with the Wright brothers. That is so cool. This is your surveillance aviation moment, Carl Heinberg. That was fabulous because all of us have confronted this bad weather and one of these big airplanes. We'll come back with Dr Weinberg and talk about international economics in the state of America. Carl. There was a jewel at the FED twenty years ago out of m my team named one Carl Whalen. Carl

Whalen was fabulous. He's now at the Irish Central Bank and he wrote a paper which I remember called real Wage Dynamics in the Phillips Curve. That's where we are right now. If we get a better economy, does inflation go up faster than real wages go up? Where all of our listeners are gonna feel miserable because they inflation adjusted wages go flat or down. You know, someone else was talking about that on Bloomberg this morning and I nearly drove off the road I heard it, you know, John,

it wasn't it was super early. I think it was one of those guys on the other side of the pond. You know, when you have inflation, inflation is a parallel increase in both prices, all prices and wages at the same time. So real incomes stay the same, Savers are poorer, spenders are richer, and there's an incentive to spend more when there's inflation, because you want to buy that refrigerator or that host today before the price goes up. And

that's the traditional analysis of inflation. It's a windfall for some, but at the expense of savers? Is it a windfall for our listeners who are out there working in the real world. They're going to get a three percent pay raise. Is an inflation going to make that evaporate? It's going and if it's a true inflation, we're going to make it evaporate. But Tom, I'm just going to be critical here.

You know, the world has gotten into this notion that CPI increases our inflation, and they're not all right, c p I. I'm not putting on my pointing headed economiside here. But every time every time the CPI goes up, all right, doesn't mean there's inflation. Every time there's inflation, the CPI goes up. But say the price of gasoline goes up, all right, that's a price change relative to everything else that makes people poor actually because their wages don't go up.

David Blanche Flower would know about money illusion. Blanche Flower Oswald wage curve, which was done at the time of the Whaland paper, really suggests some pain within society. Are we going to see that? Well? If we if we get a true inflation, we will see that right right now.

What we're all dissecting is an acceleration of the c p I and if we don't see a parallel and proportionate acceleration of wages to match it, then we'll either workers will either be better off or worse off, but always at the expense of someone else, like either capitalists, God forbid, or savers, which is more areous. With such a big baby boomer generation now approaching retirement, you start

reducing the present purchasing value of their savings. Then you get into a situation where a big segment of society is worse off. Yesterday, the new president of France put on a snappy new suit and road around Paris in an open air jeep. Today I think he meets with his German counterpart. How much does the European economy change now with his election? We had a more state elections in Germany over the weekend. Does your outlook for the European economy change is a result of what we've seen

in France and Germany over these last two weekends. Well, I think the betting has been on macall for some time now, so I think that there's no surprise to the markets this morning, right out of the box. So thinking longer term, one of the issues that Tom and I were discussing earlier today is this question of Ken Macon and Angela Merkel agree on what to do about England, and this I think is the most immediate question in front of everybody alright at stake. The biggest jewel out

there is the city. Will they allow the city to continue to exist? Well, they want that business for Paris very high taxes of course, or Frankfurt much more of a friendly environment for these kinds of businesses. And the British, of course are concerned because uh percent of the UK economy comes from the city and two million jobs are associated with the financial sector. Those are more Carney's numbers.

So I think that to me, the real question moving forward, what I want to see is what comes out of their meeting today and their subsequent communications on the Brexit question. That's the big elephant in the room. Very quickly. Here we have the snap election come up here in June. Are we're starting to see effects of Brexit playing out in the UK economy Now, Well, Tom was just over there, uh, and I think he's probably got a bigger sense of

it than I do. But certainly, sitting over on this side of the pond, it looks to me like this election is a slam dunk. It just validates the national commitment to proceed with Brexit. I think there was a great cloud put over that by some of the stuff that came out that the court challenges and all that, And I think that Prime Minister May needs that unit unitiminity behind her in order to be able to confront

the Europeans. I don't think it will help her any but it certainly puts her in a better position than she otherwise might have been. I don't know what was better. David Girl, Carl Weinberg on cross wind vectors at JFK or on the wage curve, cross winds and gray clouds with the Carl Weinberger. Michael Cannon joins US now. He's the director of Health Policy Studies at KATE the Cato Institute, and read from an op ed he wrote recently for

The Hill. He said, the reality is that Republicans are not repealing Obamacare, They're making it worse and offering to take the blame for its failures, which will ultimately cement that law in place. A bleak assesspect of where things stand here on Capitol Hill at Michael Cannon. Great to see once again, Let's let's start with the state of play. Uh, this is out of the House, his hands now moves onto the Senate. Are you at all more optimistic that the law that you would like to see could be

crafted by senators there? What do you think is that the stat of healthcare reform, of healthcare reform in Washington

right now? Well, I think you have to start with what's happening in the marketplace right now, which is we're seeing insures flee the Obamacare exchanges to the point where you have some parts of the country where there are no carriers in the exchanges after December, and there are lots of lots more parts of the country where there's only one carrier in the exchanges, so there's just one insure exit away from having no exchange plans there, and

the carriers that are remaining are asking for premium increases on the order that's uh that comes out of Maryland, where Blue Cross, Blue Shield has asked for that on top of all the past years increases like and and So this is obviously unsustainable. And the House didn't show

much of an appetite for really repealing Obamacare. They want to leave in place the regulations that are causing all this instability, causing these premium increases, and it's unsure that the Senate has any more of an appetite for that. So it may have to get worse before it gets better.

We may have to see more of these premium increases, more of these market collapses, more people going without health insurance to help them pay for the medical care they need, before Congress focuses on what the real problem is, which are these Obamacare regulations that are really destroying healthcare for something. Here's my question about those companies pulling out of these Obamacare exchanges. How much of that has to do with problems with the law and the marketplace itself versus just

the uncertainty of the conversation about healthcare reform continuing. If if the CEO of ETNA Says Say cites the fact that there's uncertainty in the air. Uh, it seems like that's being contributed to or driven by the fact that there's still so much legislative uncertainty surrounding Obamacare, at least in part to agree with that. Well, yeah, that's certainly a part of it. But the the the centerpiece of Obamacare is a series of system of government price controls

that the deeds stabilizes the market. Remember when the Obama administration went to the Supreme Court, they said, well, you can't block the individual mandate because Obamacare will destroy health insurance markets if you do that. So so the core of this law destabilizes insurance markets, and you need all sorts of subsidies in order to then stabilize the markets. And and and those subsidies were not authorized. There are

a lot of them. Warrant as. If one federal judge told us, were you in that photo shoot at the White House? Did they invite you to the unless you have evidence, I'm just gonna what did you think of that? They took a victory lap before the thing even got to the Senate. Actually, it did seem it did seem bizarre. Yeah,

it seemed like a mission accomplished. Moment because they're having this Rose garden Um press conference to sell lible grate House passage of a bill, which is you know, that's usually the sort of thing and you uh, you hold. After the bill passage, you have a signing ceremony, and that's when you invite everyone to I think that the Trump administration was desperate for a win. Okay, I'll go with that. In your essay, You've got a beautiful quote

from President Clinton on the challenges of his Obamacare. I get that. Who's in support of Michael Cannon health economics who have those bodies on Capitol Hill? Want your vision of where we should go? Well, there are people who who have introduced the Health Saving Account expansion idea that I put forward a number of years ago, that would be a bigger tax cut than the reagular Bush tax cuts combined. Jeff Flake in the Senate, Dave Bratton the House of Interest gets the music, and and then and

and there are others. There are other members of Congress who are working on legislation right now that would be that would actually appeal and replace Obamacare, and they're trying to get that into the debate. David gurn Time King Michael Cannon of Kato truly one of the nation's experts on healthcare. Michael CNN's got it. We thank singing and for this. And as the usual person who really needs healthcare coverage, she has cancer in Tennessee. Quote it's that

or die? So what else would you do? Which I think is a question for a lot of us. You mentioned earlier. East Tennessee is an example of where this is not working out. Where are we going to be in one year? And her name is Melissa and Ants and she has an advanced form of leukemia. How did you know that? I know? All so uh so? And Melissa's one of those people who is having their access

to care threatened by the instability created by Obamacare's regulations. Now, if Melissa has a pre existing condition in decent society, if she can't afford the medical care that she needs, we should do something to help her. We used to do that to be stable. Well, you know, there are a lot of people falling through the cracks of health care sector. But that has to be a stable system of assistance, and Obamacare is not that. Does Trump Care

help that? No, actually makes it worse. She she and people like her would be I think even worse shape under Trump Care, because you have a race to the bottom even for those who have coverage. What's the motivation, as you see it, for structuring and completing and voting upon the law that Republicans in the House voted on. Are are you a a cynic who thinks this is all about politics? Or do you believe that there are Republicans that thought in good faith that they were doing

something to change or two to better the Affordable Care Act? Well, you know, Republicans have their own sort of pre existing condition, which as they care about taxes and don't care about healthcare. Uh there. I like to call them the Christians scientists of public policy. They just don't do healthcare. And if you look at this bill, it really shows the motivation for this bill was to cut the taxes in Obamacare, set up tax reform, and who really cares about the

healthcare part? And people who care about the healthcare part are people like Melissa and NaN's, people like me, people who actually want a stable system of subsidies to help those with expensive illnesses. So if if if I'm running a major health insurer, if this law were to pass, say the Senate were to adopt the bill as as written. Does that provide me with more certainty? And if so,

for how long if you're an insurer? Yeah, I don't really think so, because there's there's still this question of um because the very part of Obamacare that is destabilizing the market is still on the books. And the only way to solve that is either to repeal that which we call community rating, it's a system of price controls, or you can try to just subsidze the heck out of insurance companies to keep the markets from collapse, to keep them from leaving. And uh and and so your

choices are. It's really a binary choice. You can either repeal Obamacare's regulations or you can just go hole hog on Obamacare and and and and do what the Democrats wanted to do is just subsidize the heck out of the market. What do you see all of this going? It goes to the Senate. Now, as I mentioned, they rewrite it, right, holy right, like it's gonna be a whole new thing. Yeah, there are other their senators who've already written bills that they think would be a better approach.

They're going to try to call together fifty Senators. But I don't know how. I don't know what can pass the Senate. But I think that I think the longer this drags out, the probably probably the better the product will be because you will see more of the dislocation, we'll get more of the stories from people like it will be more urgency, and it'll focus their attention on the actual problem, which is the regulation. But isn't this debate no different than when you were doing healthcare debates

on that beautiful law at the University of Reginia. I mean, what's changed? We're arguing about do we want to be like Britain? Many people say yes, many people say no. I believe Cato says no. But what's the difference between this conversation and your first healthcare chat at U v A a million years ago? I wish there were more difference. For a while there we had Republicans who were we had Republicans opposed to this sort of Obamacare approach, that it would be a step in the direction of a

single payer system. And now that they're sort of caving on this pledge that they made for seven years to repeal Obamacare, they're gonna bring us closer in two ways. The first way is by giving a republican UH imper mater to these ideas, and the second way is by UH taking such a drubbing at the polls. The Democrats are going to take over Congress and they're gonna want single But the fact of the matter is, I believe most polls show people have an affection for some elements

of the Affordable Care Act. How can you ca to wise those constructive elements of Obamacare? Well, they're not constructive, the destructive, and polls say that not the whole thing people love it? Yes, the whole thing, people do not love it. We've done pulling on this at the Cato Institute. We've asked people, when you tie the costs to the benefits to the supposed benefits of Obamacare, do you still

like it? And Democrats oppose it? Okay? So what Senator where I need a common ground between Uve Reinhardt, Michael Cannon, Senator Schumer and I'll pick on Jeff Flake? Okay? Where is the common ground to get our seventent of g d P in control? So there's some sense of coherence? I think that the only way that we're going you know, what are the necessary ingredients to getting a build through Congress. It's a step in the right direction. Is the president

has to engage. He has to engage by saying that in his Obamacare's regulations that are reducing the quality of care for people in the exchanges, and that's the because that is what that's the cost of Obamacare. That actually motivates Democrats to oppose it. When you tell Democrats that these supposedly beneficial provisions actually reduced the quality of care that they and their family received, they flipped from support

to opposition. Was there or is there a piece of legislation that mirrors what you think should happen to the affordable A character? It always surprised when I lived in Washington for a very long time there was so much conversation about the repeal of Obamacare. I guess you could say the same thing of tax to form as well. There there wasn't a piece of legislation ready to go. Is there or was there a piece of legislation that would would in in some reflect what you think should

happen to this law? I think there is. You know, Ran Paul has a bill. Senator Ran Paul from Kentucky has a bill that would repeal Obamacare in full, provide some transition assistance for people with pre existing conditions, and vastly expand health savings account which would actually start to bring down healthcare prices, which is the most important form of assistance we can provide to people with pre existing

conditions and low incomes. I have some quibbles on the margins with how he goes about that, but yeah, there's that, there's legislation out there. A lot of politicians talk about the hardness of healthcare. This is difficult stuff. Are there politicians who get it, who you admire their engagement with the issue, who are who are willing to hear you out and to to walk through these uh these thorny woods. Well, they're like I said, Republicans have this prexistant condition where

they don't do healthcare. And unfortunately, there's a real, you know, sort of a wonk gap in Congress and outside of Congress where Democrats invest in this issue much more heavily than Republicans do and they out maneuver Republicans as a result. And so one of our jobs that the CAT and students have been trying to bridge or make up that that that walk gap and Uh, you know, Obamacare helped for for a time, but it didn't do enough to

focus their attention on this. We're gonna talk about taxi form a little bit later, but let's let's devetail it quickly in the two minutes that that we have a lot of people said to get to tax before, we had to see some reform of the affordable character. You buy that argument. Do you think it's gonna gonna forestall movement on tax before not having this done? Well, what it'll do is it will make it harder to make the tax reduction permanent because of some weird Senate budget rules.

And that is really what motivated the House to pass this awful healthcare bill, because it does cut taxes and so it facilitates tax reform. And Republicans are playing to the stereotype, which is all they care about is cutting taxes and they don't care about health care. Tommy didn't ask you what happens in twelve months? Questions what happens not to not to the Cadillac plans, but what is it? Is it? John Tucker? V W plan we have? Is it a Cadillac Plan? VW. Beetle Plan, the Bentley Plan,

the Bentley Plan. Okay, but it's not a joke. I mean to the people of East Tennessee and name the eighteen other geographies, where are these people in twelve months? That's hard to say. I don't think it's Uh, it's hard to say. I see two possible outcomes. One Congress actually repeals the regulations that are causing this problem and in the same legislation provide some assistance for people like

Melissa and ants. Or they just try to put band aids on this, and we have more and more stories like that and more and more people falling through the cracks. How cool was it to have Ellen Meltzer at CATO? Was it great? Just meeting after meeting time after time. Um, he's a He's an impressive person. Yeah. A great loss to all of economics and cluely to our policy in Washington. Michael Kennon's with the CATO Institute, Allen Meltzer was with

Carnegie Mellon University. David Gura, and Tom King worldwide coast to coast in New York. Together, this is Bloomberg, brought you by Bank of America Mary Lynch, dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections. Mary Lynch, Pierce Federin, Smith Incorporated, Member at side PC. There's something

new from Bloomberg. It's called Lens. Starting right now, you can use the Bloomberg Io s app off your iPhone or iPad, or our new Google Chrome extension to read any news story on any website, scan it, and then instantly see the news stories relevant market data from Bloomberg. In addition, see all the bios of the key people mentioned in the story. It's called Lens, and it is just that, a lens into the people and the data of any story you may be reading. Again, Lens brings

you the power of Bloomberg's news and data. Download or Io s app or search for the Bloomberg extension at the Chrome Store to try Lens out. Learn more at Bloomberg dot com slash Lens. David Grant, Tom Keene in New York. This is bloom e Surveillance on Bloomberg Graded. We had the pleasure of speaking with retired Admirald James to Rita's last week while he was in Washington preparing to head up to the DIRKS and building to testify

before a Senate committee on cybersecurity. He did that, and a day later there was a huge malware attack, ransomware attack worldwide. We're still figuring out the source of that. They're still concerned about its spreading. Adamlald James to Vida's now deal in the Fletcher School of Law Diplomacy, A tough university, joins us Adams Derida's great to speak with

you once again. Describe what we saw here on Friday, the degree to which you were worried about this beforehand, and how worried we should be that we could see something like this happen again and perhaps again and again and again. I was very worried when I testified, and I'm even more worried now. And let's face that David dis is going to be a rolling thunder of a series of attacks. This is This particular one was derived from tools that were if you released into the wild

from the National Security Agency, They're very potent. They can be manipulated. We should expect more of this. Unfortunately. On that note, I read the blog post by the president of Microsoft, that being one Brad Smith, and he said the government should treat this attack as a as a wake up call, and he said, this attack provides yet another example of why the stockpiling of vulnerabilities by governments is such a problem. Here you have some particular expertise set.

Why is the government stockpiling all of this? What would a company like Microsoft like to see the government do well. Let's think of two kind of similar looming towers. One was Pearl Harbor and another one was nine eleven. In both cases, the nation took a devastating blow, and afterwards we convened a blue ribbon commission and looked at what we need to do this time. You can see this

looming tower. Let's get that group of smart people together and tell us what we need to do to protect ourselves. James trevide us with us with such your school Bloomberg surveillance. This morning worldwide brought you by Investco. Looking for investment views, Investco's high conviction portfolio managers are just a click away. Go to investco dot com slash us to subscribe to the investial blog and follow at investo us on Twitter. Okay, Admiral,

So we had Pearl Harbor. No one saw it coming except maybe hauls that you'll put a third of the fleet out to see where's Admiral King, where's the Admiral King of cyber security? To give us the urgency to get up on the table and start screaming. I think it reposes in the business world. So it's people like Eric Schmidt, Uh, it is, people like Bill Gates, is people like Dan Shulman of PayPal. They see this looming tower and that's why you're hearing them as I am

talking about the danger ahead. Well, on Windows, where's Microsoft? You know how it's going? My Walter Cronkite imitation today from Moscow to Maine. Okay, great, Microsoft, I got all the ms in there. Where is Microsoft? If this is a core Windows issue, they need to be prepared for more this. And what is different Tom is the release

of these tools from the National Security Agency. They are lethal devices, and I assure you in Washington State today those engineers are all hands on deck to try and be prepared for the next wave that's coming. How fierce is the competition for talent here? You've unveiled a proposal here for new service Academy focused on un cyber security. Just in terms of how many people are trained and able to do this kind of work. How fierce is

the competition. The short answer is not enough. The competition is beyond fierce. It's white hot, and we are going to have to ask our young men and women, as they do in the other branches of the military, to stand and deliver in a cyber force. Here's the good news.

It doesn't have to be massive. We don't need hundreds of thousands of people, but we need five to ten thousand dedicated cyber warriors who can stand and respond to these kinds of attacks, whether they come in this case from cyber criminal or from nation states or from terror. Do you assume, Admiral, because these people are evil, they'll always be one step ahead of our good technology intentions.

I think so in the case of cyber crime. Another way to put it, Tom is that almost inevitably, offense will overcome defense in this world. So you have to treat these cyber criminals the way we've treated pirates at sea. You need a global response to them. Okay, folks, I failed. I tried to get through this Trump fee with the adimalle And what makes a good FBI director a wise one up? First of all, he or she has to

be unbiased Secondly, a law enforcement professional. I would argue someone who's been to law school, who served at the highest level of advising. In number three, the ability to speak truth to power. I think James Comey had those attributes, but he was burned by this president. Now we're gonna have to ask another American to step into a very fought situation. James Stevidis is it Fletcher School. His book

is fantastic. I'll put it on Twitter here in a moment on leadership is just absolutely out short, you know, just typical Stevidis. Uh, David, it's just short, right to the point. And the syllabus for you, I know you've been reading in Disco'm like doing the voracious reading. That's what I'm doing to try to keep calm given this new slow from Kevin's Really, how did you observe this weekend? David in the Washington Zeitgeist. Yeah, I'm curious to see

how fast all of this plays out. The White House very eager to get somebody helming the the FBI. I will see if they're able to do animals read. We've been talking about retail over these last couple of weeks. How Davidvitz joined us the last week Shelley Band columns from Bloombergadfly as well painting a picture for us of the UH bleak retail senior here in the US. Joining us now UH is Oliver Chin. He is with the

counting Company. Great to have him. As always to Oliver, I look at the companies you cover, the three dozen or so that you're you're covering. How similar is the narrative? Is the story among those three dozen companies? Yeah? What we do have in terms of a similar narrative is really the decline of physical store traffic in terms of football. Um. However, it's it's not true everywhere, I would say department stores and mall based retailers are seeing the brunt of this.

On the other hand, UM, I cover a wide swath of over thirty stocks luxury goods. In terms of the luxury spending environment that's been great and then deep value, so customers want to shop it out let's, they want to shop it off prices like t j X and Ross and so it's not all doom and gloom, but there is a lot of doom and gloom. We'll get to the luxury space in just a minute. Let's start with with Macy's, which is where the story began during

earning season last last week. I look at your your note about Macy's and you say that it's a company on a journey. How much longer are investors prepared to give this company as it travels on? Um? It is on this journey. It's at the epicenter of a lot of problems and disruption in the industry. UM. I mean investors have really penalized the stock. So the multiples come in tremendously to to below ten times about seven times to e multiple the industries around fourteen to fifteen when

things are normal, So investors have really penalized evaluation. How long will this take? This disruption occurring with store closures is quite painful and we'll take multiple years, So negative calmp store closures. UM it looks like it's a rough spot for for a while and Macy's is trying their best. Part of your your prescription here is from Macy's to reinvent product lead times. How difficult is that for for

for a retailer to do? It is challenging because it's an organizational challenge in terms of restructuring the right people in the right place at the right time. But Macy's has about a one year lead time, and retailers such as t J Max work on one to two quarters, and retailers such as prim Mark and h and M and Endo texts can work as short as a month or a few weeks. So Macy's needs to shrink it um and that's the name of the game. Oliver Chin with us account and on retail, Oliver, one of your

great strengths as the kids. You look at specialty retail and you look at what the kids want and they don't want. Is any of this discussion we're having a generational shift away from the Internet, away from Amazon. When you look at the kids today, is there just a different way they consume versus before there is. There's profound transformations happening, and one of the key things is authenticity and really being true to yourself when you do you.

So a lot of the macy story has been the consolidation and the sameness factor, which just isn't as appealing. You want things that really, you know, show your personal style. So Macy's needs to radically reinvent products. Also, keep in mind experiences and experiential has really transformed. So the stores need to be entertaining and everybody wants to really display

what they're doing on social media. And then casualization in terms of really the the yoga pan is here to stay, Tom and Turn I felt the same thing this weekend. What the hell is why you this guy's on never again? What is casualization? Um, it's kind of the opposite of your both ties. But basically, um, you know, at leisure is a new formal wear see heard of the prestige cf A institute word for that on level three c

f A David Slab. We are printing new words here every day on Bloomberg Surveillance already mentioned luxury at the top. Let me go there into this two point four billion dollar deal coach buying Kate Spade. Does that deal make sense to you? I walked by the Madison Avenue coach house. See all the coaches investig in becoming a luxury brand. This is something we've talked about with Jelly Banjo, our colleague here at Bloomberg gadfly about as well. Does the

deal make sense to you? Yeah, it does because we think there's a lot of synergy. Specifically, UM, Kate Spade can expand in China and Japan. Also, Coach has a leading leather supply chain capability and Coaches really building America's conglomerate. In terms of a modern luxury platform, we cover the European luxury retailers such as Richemont Cartier as well as Louis Vuitton, which we're recommending LVMH, but Coach coaches approach will be different. It will be inclusive in terms of

a house of modern luxury brands. We like that thesis, and we also think Kate Spade excuse very attractively towards millennials and and everybody does want youth, and it's important for the long term health and growth of of a of a platform. Who's the competitor there when you look at American houses trying to get into that luxury space to compete with some of those European brands you mentioned,

who stands a chance of rivaling them? Well, we have a really limited set of luxury within the United States, So Coach kind of stands alone because they have very good handback store product and marketing execution. The other players we have are Tiffany, Ralph, Lauren Southeby. Southby's is really on an awesome journey becoming much more modern and their approach and broadening appeal. But Coach is really unique in terms of being keming for multi brand. You've used the

word journey twice, Oliver. The only thing I know about retailers of my wallets on a journey to Gucci. It comes back lighter, Oliver Chen, thank you this morning. Greatly appreciate seriously, folks. He does just terrific work across a really wide group of redown we should frame the Congressman Kevin Brady is being north of north of Houston and uh and the woodlands and and I love one of the articles on the woodlands again north of Houston, the

eighth District couple. But above that is it's a safe place if you don't like snakes, because there's only three venomous ones. Which is it's it's it's a different part of the country. Kevin Brady joins us now of the Texas eighth Congressional District. Key's chairman of House Ways and Means Committee. Chairman, Are you distracted by all going on at the White House? Or can you actually commit legislation

through the end of this year? Yes, I can, so thanks for having me this morning, and the answer is that, yeah, we're completely completely focused on tax reforms. So is the President's tax team as well. And so I think one of the important things here two weeks ago when the pres Since tax team talked about his principles, what they also laid out was the the timetable head, which is for the House, the White House, and Senate to work together and see if we can't unify behind a single

tax plan. I think that is critically important if we can finish that out, and I think it uh better assures that we can finish this in which is our goal. Chairman Brady, how did you react when you saw that one pager as it's called, from the White House, those

two hundred words, those principles that you just described. When I talked to guests here at Bloomberg, executive's accountants, people from the business world, they've been operating off of your blueprint, which is more fulsome than that document we got from the White House. What do you do with that one page piece of paper you got from the White House? Well, actually, as I was pretty encouraged, because you know, where there's about eight percent agreement on the key um issues, we

still have some work to do. Obviously, there's some differences on the rights and someone that's on as well, the family um. A portion of this, which I think keeps getting lost in discussion, was very close. That the two were very close and so well. I think we start from a very solid foundation. So I was I was encouraged. You've got that left then one fit of this thing to sort out. I imagine part of that is this border adjusted tax, where you're disappointed to see the White

House not embrace that. No, not necessarily. Our discussions with them and have been pretty positive. Look, I think the way Secretary Manuchin talked about at the morning earlier that morning on that day was accurate, which he said, in effect, he said, the way that that that provision was originally introduced won't work, but we'll work with the House going forward to see if we can't design it and make that work. I think that's exactly accurate. Here's what we're doing.

We know what our competitors do in China, Europe, Mexico, and Canada. They beat us on lower rates, they beat America by no longer tax and worldwide, and they border or just we made in the House a conscious decision

to go straight after our competitors. And the principle is this in border justability, which is, look, do we want to keep the status quote that encourages jobs to move overseas and actually favors foreign products and workers over US products and workers, or do we want to tax everyone equally in the United States so you have true competition for the first time, and it not only eliminates every tax incentive for companies to move their jobs and research

overseas and actually creates strong incentives to to bring them back to the United States. We're gonna make the argument and bring the case in a new design by the way of border justability to our discussions with the White House and the Senate. Mr Brady, you have a wonderful experience in this nation from the spine of the Midwest, from South Dakota on down Texas. When when you when you look at the importance of the US Senate, how will they rewrite Trump Care? Do you look for them

to do a complete redo? Then you will have to compromise on you know, I don't know. That's a great question. I don't know the answer yet. What I'm what I'm encouraged by is that I think they'll take the key provisions from the House and continue to improve upon it. For example, we know that in these two big steps were taking beyond repeal. Those two big steps being let's let's restore the free market of insurance so people have

broader choices. Let's restore state control rather than Washington control, so more innovative, so the states can design healthcare better to meet their needs. In that is this individual tax credit that can travel with people from job to job, state to state home to start a business or raise a family, even into those early retirement years. What we noticed is that those in the fifties six four year old arrange frankly, need a more muscular tax credit at

that point in their lives. The House sent over gotah almost ninety billion dollars to the Senate. You know, we we expect them to use those dollars, uh to muscle up, power up that part of the tax credit for Americans in that age. Right, That's one example, Chairman Brady, Thank you so much. David Gourd and I look forward to speaking to you. Mr Brady's from the eighth Congressional listart just north of Houston, Texas. Thanks for listening to the

Bloomberg Surveillance Podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene David Gura. Is that David Gura? Before the pod cast, you could always catch us worldwide. I'm Bloomberg Radio, brought you by Bank of America Mary Lynch. Dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections.

Mary Lynch, Pierce, Fenner and Smith Incorporated, Member s I p C.