Ross Says He 'Will Probably Sell Stake' in Putin-Linked Company

only optimistic, but you're double digit optimistic. So few agree with you. What do they get wrong? I think that there's this belief that if you're optimistic on stocks, you have to think that the economy is going to, you know,

have this tremendous momentum behind it. And our view is that we are in a good economy, but that valuations will drift higher because the risks right now, especially around the potential for recession, are really much lower than average, and that lack of risk is what will push the stock market higher. What's your counsel of how worried or cognizant we should be of recession risks at this point, What are you looking at and what would you advise clients to to do at this point when it comes

to fear of or or worry about a recession. So we put together this credit Swiss recessionary dashboard and we look at things like is the yield curve flatter inverted? Um? Absolutely not? Do you have our jobs being created? Yes? Do you have is inflation um under control? Yes? Are you seeing UM construction activity improving as opposed to contracting? Yes? Are you seeing credit write downs um? Corporations are able

to meet their dead obligations? Yes? Um. If you look at each of these seven criteria, were are about as solid as we've ever been. What role is the Fed playing in all of this? Is you look at that dashboard? How much are you paying attention to what the central banks are doing? And what does the j Powell nomination mean for markets going forward? Well, so that that's that's two questions first, the first, right, the first first come on at a time. Monday's folks, we don't do this.

Let's start with how co you are with the Fed? Is well? All right? Um? All right, So since us I'll answer in the other direction. But we know but so, but Powell really is a continue The market is perceiving it as a continuation of yelling type um governance, and so I think that that alone probably means that that it's not surprising that it got very very little reaction.

But the there's this consensus view that the FED ultimately is propping the market up by all of this money printing, and then if they stop printing, bad things are going to happen, and I just agree with that wholeheartedly. I think that the market is doing well because the economy is doing well. I think the Fed is doing is actually responding to the economy um as opposed to the other way around. And therefore, um if they remove some accommodation,

I think the market is gonna be perfectly fine. But I will tell you that's not the consensus view. The consensus view is, oh my god, they're gonna remove liquidity. Bad things are gonna happen, and I just think that that's off base. It's been almost a year since since election night. You were around the building on election night as we did the coverage of the results coming in. What have we learned about the markets in that year since?

ALASKI about the prospects for tax form and all that in just a sec But but in terms of enthusiasm for policy this administration, what have we learned in these interviewing three six, five days. Um, well, a bunch of things. I mean, the one that that's perhaps the most interesting is there was this belief that, and once we kind of shook off the surprise of the election, was that Trump was going to have this huge impact via tax changes, and the market has really taken the opposite side of that.

That trade in the last six months, and more specifically, those companies that would benefit the most from tax changes have actually underperformed since, um, you know, since his inauguration, and I think that that's been a big surprise for many. So it was the market either saying one of two things.

Either I don't think that these are ever going to get implemented into law, or in year nine of a recovery cycle with an economy that's in pretty stable footing, maybe we don't need or want a big late cycle stimulus plan that would create inflationary pressure. So we can argue why the market's not celebrating this potential for for tax reform. But that's what the markets saying I'm gonna ask you what what companies stand to benefit the most

should it get three. You've done a great list of of all the companies you're finally have who have some upside here broadly speaking, what types of companies here would benefit most from from tax Again, I think that we have to split this into two things. If you said that we're going to get tax reform, but we weren't going to get any inflationary pressure the economy, and the FED wasn't going to respond to this stimulus by tightening policy more than expected, then it would be companies that

are more domestically oriented that can't avoid taxes offshore. And these could be you know, retailers would be a good example. Those should be the biggest wins, and the biggest losers are industrial companies that do a lot of business offshore that have very low tax effective tax rates. Um. But I think that the second issue is the more important one is do you get some other feedback loop? And that's what investors very often miss its and things don't

move in a straight law and investment land. UM. So if this is stimulus, does that overheat the economy? Does the force of FED? And and that's the part that people may miss headline crossing the Bloomberg. Here we're talking about the President of the New York Fed, Buil Dudley, announcing his retirement mid two eighteen that according to the New York Offensive, confirming what had been reported over the

course of the weekend. As we mentioned, Tom sitting down with the President New York Fed a little bit later, a little lunch for four people. Let's let me explain to our global audience, it is always appropriate when the New York Fed president speaks to the Economic Club of New York, John, what's the question I get to ask him questions? Being a good gentleman from the Economist magazine, what's the question you would ask? They're very retiring, Bill Dudley,

one of the perhaps more anything else. And this is the guy who, remember it's not that he runs the Fed, but he's the one who's in touch with the way the markets are going to respond to Fed policy. UM, I'd want to get a better understanding of what it means if and when the Fed continues to move forward with balance sheet liquidation and and how do they how do they equate a little bit of tightening from the FED funds rate with with balanty liquidation. How do they

weigh these against each other? How should the market perceive it? I'll give Bloomberg Radio a first look at this. One of my questions will be under crisis, how does a non PhD listen to the fancy pants PhDs the FED like the gentleman from Berkeley. I think with a four standard deviation move in, John gollubs world down down, down seventent You picked the gloom, John, How does a non economist chairman and chairman Powell listen to people like Bill Dudley?

I think Bill's got real knowledge on it. It's it's a it's a it's a great Is that okay question? No? No, it's it's it's it's a it's a great question. And I think if you look at the uh, you know, the leadership of FED by academics, I think that there's um, you know, in hindsight, I'm sure that there's a lot of skepticism over the you know. One is how they've did help with the crisis, which I think they've gotten

tremendously good marks on. And then what does the world look like after that when the world has returned to normal as a separate question. Here's an email coming in, David Girl, Neil Sauce on the shortlist, like place Bill Dudley. You're supposed to say, John, Yes, Dr Sauce would be a wonderful So we we we we love Niel Sauce. Neil Sauce Folks is vice chairman of research for all

of Credits, is extremely qualified. Looking at the release here, Bill Dudley's dream is expected to end in January of two thousand nineteen, So Bill, that would be leaving here a bit early mid two thousand and eighteen, he's saying. And a note here in the release from the New York Fed uh search will will begin shortly and they expect that search to conclude by mid two thousand and eighteen, depending on finding the best candidate. UM, so look for

more clear on that. I have a moment of silence for Terry Longer and the Macy's CEO, and also ahead of the Economic Club of New York who's on the committee, and I believe he'll be on the committee at the New York Fed. You didn't know this was happening, you know, honestly, I mean if I if I knew, I wouldn't tell you.

But the answers. No, I had absolutely no clue in all, but I'll tell you guys like Terry London are going to be absolutely inundated with names um to take this extremely important a position and might point out a position under crisis. Bill Dudley, Uh, wonderful guy will retire mid two thousand eighteen from the Fed, and again he will speak.

Matt Bessler and our team will have full coverage of that speech from the Economic Club of New York, and my questions to President Dudley have shifted from the minutia to the bigger and broader. Coming up, Francia Kwan London an exceptionally timely conversation with the Secretary of Commerce Wilbur Ross in the News as we can, David, what Cyprus and Russia is that sort of members of the Putin family as well? He denying all of that being improperly. So we'll see what he has to say to Francin

here in just a few minutes. Maybe Mr Ross can buy the New York Giants and put him out of their misery as well. Coming up, Wilbert Ross, stay with us worldwide. This is Bloomberg. He has been on the show too many times as an industrialist, as a financier out of Yale University. Wilburt Ross selected by the President to be Secretary of Commerce, best known over the last number of months for Ross Navarro, which was a white paper.

He actually showed it to me at one point at an Economic Club of New York meeting, and uh, that was controversial to say the least. Now more controversy with Secretary Ross over the weekend his relationships with Russia, Russia and Cyprus. From London. Here is Francine Laqui with the Secretary. We need to talk about tax but I also need to ask you about the Paradise papers. So he's certainly

in the papers quite a lot. Today. You've retained investments in a shipping firm that has business ties to the son in law of the Russian president but also an oligarch under sanction with hindsights. Should you have divested this stake? Well, first of all, let me correct what you just said. We have no business ties to those Russian individuals who are under sanction. Prior to my joining the board of Navigator, they entered into some charter arrangements with Cyborg, which is

a big Russian hydrocarbon company. I had nothing to do with the negotiations, never met the people under sanction. Cyborg never has been under sanction, So there's nothing whatsoever wrong with Navigator having a deal with them. Second, as to the disclosure, much has been made that it wasn't disclosed.

It was in three places on my form to seventy eight, which is public document at place ten point one four point one point three, ten point one, five point one point three and two four point one point four point too, as well as on the Office of Government Ethics website public website the symbol is o g E dot CoV okay. Couldn't be more clear. But with hindsight, Again, there are allegations about ethics, about you know, creating a conflict of interest.

Do you think you should have divested this? Well, there is no conflict of interest. We don't regulate shipping and that's why the o g E let me retain shipping interests. Would you welcome an investigation into this? Investigate what? But is there not an ethical question that needs to be raised that you've done no nothing illegal, right, and that's very clear, very good, nothing even improper at all. Um,

The o g E came to an independent decision. Plus, before I meet with any corporate party, the O g E clears a that I can meet and be the accent to which I can participate in conversations. I have never sought a waiver from any of those strictures. You're keeping the steak? I didn't say that. That's a different question. You're saying, was there anything improper? There's nothing improper, either in the way we've handled net meetings or in the

investment itself. Will you keep the steak? Probably not have been actually selling it anyway, but um that isn't because of this it Talk to me a little bit about your upcoming trip to China. What is the president's stands on dealing with China when it comes to terroriffs and steel. Well, we are hoping for some specific deliverables. We're un leading a trade mission of some twenty nine US companies over there, and we hope to come away it's some very tangible

and hopefully large UH deals for them. What are you doing in London? Are you talking trade in post Braxit London? Is several several different things. UM as spoke to the Trilateral Commission UH, speaking to the b C, I, UM doing all kinds of things, as well as meeting with various government officials, and I went to the Balfour Centennial dinner. Okay, Secretary, if there is a Brexit that actually really rips out the UK out of the EU, how quickly can the

US have a trade agreement with the UK. We should go pretty fast, because well, we can't negotiate right now, that's forbidden under EC rules. We do have a working group that meda in July in Washington is meeting next week here in London. So they're kind of scoping things out and going as far as they can without violating the EU regulation to make preparation. Will you also talk with the opposition Labor Party in case there's a change of people in charge. I think we'll be talking with

whoever is the government. Mr russ One very last question when you look about trade, we're expecting the status of the investigation into imports of steel and aluminium. When will we get that well, as the President has indicated, that will be some time after the tax legislation is dealt with, So that should be when you respect tax the rappid hopefully pretty soon before Christmas. We would likely think it would be a wonderful Christmas present for the American business

and consumer to get a tax reduction. So we hope so Secretary Ross in London with our fancy and a qualm. You might note the first interview David Dunne from ours that right in London. I believe that was done by Mansion House. There's done by Wardour Street or whatever. I can't remember now. Mental block Christopher Wren's churches right there. St Stephen's as well. Speaking of St. Michael's. Here Michael McKinnon to talk to us about Lord Dudley leaving the

New York Fed. I want to go, Mike, just because the time to How is a New York Fed president selected? The answers, it's a lot like the other banks. But boy is it a different process? Well, it's it's different than the Federal Reserve Board. We should make that clear. Members of the Federal Reserve Board. There's three openings now if Jane leaves before nominated by the President, confirmed by

the Senate. Individual federal reserve banks have boards of directors, and those boards of directors whose the person to be president. The Fed Board in Washington has vitail power, never exercised it on a nominee, but they do have to get approved by the FED. The President of the United States does not, he has no role. The other thing is there are three classes of directors of each Each FED

bank has nine directors three classes. One class is bankers at the New York FED, it's James Gorman from Morgan Stanley, Paul Mellow of salve A Banks, Jerry Lipkin of Valley National Bank. None of those can take part. Only the other directors, the Class B directors who are finance, and Class C directors who are in theory is supposed to represent the public. Emily Rafferty of the Metropolitan Museum of Art,

she's she's a Class C director. Sarah Harowitz is the chairman of the FEDS Board of Director New York FEDS Board of Director. She's the executive director of the Freelancers Union. She's leading the search along with Glenn Hutchins, who is the co founder of Silver Lake Partners. In the news for the reasons this is this is like a free for all. Let's be blunt you. The history of this over the last thirty years is everybody piles on for there. Well,

it's very interesting. The New York Fed obviously the most important of the FED banks, and so they tend to hire really big names. It's been a mixture of internal candidates over the years and external candidates. Two of the the New York feds most prominent presidents, Jerry Corrigan and Paul Volker, were president of the Minneapolis FED when they were selected, and so some people are looking at Neil cash Gary and wondering what he's doing the next couple

of years. Another name that's been floated is Robert Kaplan, who of course originally worked in the markets at Goldman Sachs, then was at Harvard for a long time and as now president of the Dallas FED. You've got Simon Potter, who is head of the Open Markets Committee for the New York Fed, and that was the job Bill Dudley had before he became president. Brian Sack, a former head of the Open Markets Group, is also on the list. So um, some big names out there that are he

is he is on the talking Points list. We don't have an official copy of Sarah Horowitz's list. Are you on the list? Always? Run? I was trying to sell Neil Sauce the last hour the voice Chairman. It'll be fun. This is a real uh Exerciory Jeffrey Lacker's successor. Yet has that been that yet? We're still waiting for a Richmond fair enough, Michael McKee, thank you so much. Are you going to go to this swarm? I'm gonna watch you and you can have half of Thomas Rose. I need,

I need help with my question for Michael McKee. It is tax reformed time. It is a time where lots of blowviate. And if you actually have analysis the Tax Policy Center of the Urban Institute and Brookings Institute, UH lead for years William Gale and Gene Stirley, I should mention as well. And in the trenches of our tax reform, tax cut, whatever it is, is Howard Blackman. That's a name that you will begin to know over the coming

weeks and months. And we're honored that the senior fellow at the Tax Policy Center joins us now, Howard, congratulations on the issue coming front and center for you. What is your single observation of where we are right now on this tax reform bill. Well, as Donald Trump might have said, nobody knew tax reform would be this hard. Uh.

This is a real challenge. It's particularly a real challenge for Republicans to do this on a partisan basis, because to pay for many of the tax cuts that they favor, I need to get rid of tax preferences already in the law, and it's really hard to do that when you don't have political cover of a bipartisan bill. Let me ask you just about what we know about the

ramifications of this piece of legislation. Of course, the Tax Policy Center was in the cross Harris when Kevin Hassett made a trip there to speak to you in the Tax Foundation as well, and he was critical of the fact that y'all did some analysis early on that he thought was was premature. We see this bill being rushed through committee. Uh. The chair of the House Ways and Means Committee says he wants to have it done by

of November. Is it Is it your sense that we're gonna maybe have that happened without having a full sense of what this bill means. I think that's true. In the House. The House is on a fast track. They have the votes, and I suspect it will move pretty quickly. The Senate, I think is going to be a different story. I think the Senate is going to take quite a while to work its way through this bill, and I think there will be some opportunity to chew over many

of the details. One of the things that that we're all learning just in the last few days is that there there are provisions building enormously complicated. You know, while the while the supporters of the bill talked about simplification, and there is some simplification here, there's things in here. They're very, very complex, and people even four or five days after the bill was first introducer just trying to

figure out what they mean. You have members of this administration guaranteeing that there will be no tax increases to cuts for for the middle classes. You've seen it is that? Is that possible from from what you've read. The problem with this bill is is that the changes that they make are going to be very idiosyncratic. Whether you pay more tax or less tax, particularly from the middle income, is going to depend a lot on a lot of

specific circumstances. Where do you live, what's the makeup of your family, how many people who have how do you make your living? Uh So, I think what we're going to find and we hope to have an analysis of this for the next few days. I think what we're going to find is that for some middle income people it will be a small tax cut, for some build income people it will be a small tax increase, and for some very high income people it will be a

very big tax cut. Howard Gluckman was Tax Policy Center. To me, the the elephant in the room here, Howard, is the one point five trillion number. Bill gil writing on this this weekend. Do you believe in that number? Are you out at the two trillion dollar level like others? So I think that this proposal is likely to cost more than the one point five trade. And now the

problem is they have built themselves this box. They have to, at the end of the day pass a bill that that increases the deficit or it loses no more than one point five How do they do that? What's the elephant in the room that goes out the big fat door. So this is a so this is a lower the bridge or raise the river story. They can either do it by h finding more tax preferences to get rid of, which is I think pretty unlikely, or the other way they do it is they make the tax cuts less generous.

Many people believe, and I'm among them, that the corporate tax rate in this bill is not going to survive that by the time they're done, that corporate rate is going to be somewhere. I want to ask you just a logistical question here. I think there'll be a lot of people listening who don't have Washington experience, haven't lived there, and wonder how all of this can come together is as quickly as it can to go from nine pages to many hundreds of pages to to hammer out some

of the complicated things that that you're talking about. In particular, how's all of this being done? So this is you often hear this phrase in Washington Regular Order, and this was this was the idea that a bill would be introduced, there would be months of hearings in the committee, the committee would spend time drafting the legislation. That's not what we're doing this time. What's what's happening this time is is written. This bill was written in the back room

by a handful of people. They are now shopping it to rank and file Republicans in the House, trying to get them on board. Um, there will be a markup in the Ways of Meats Committee, but it's going to be basically performed. It'll be a show, but most of the decisions have been made. It'll be jammed through the House. Uh and the Senate process is going to be a

little different. I think there'll be much more input from rank and file Republicans at least in the Senate bill and and and depending on what Chairman a Hatch of the Senate Finance Committee does, there may even be some press. This is the first conversation. We're thrilled. I'm bringing you a hard electman of the Text Policy Center. He and his colleagues just to true of a work. I'll send out uh their internet site, uh tay to their website. It's just I can't say enough about there were Coward

Gluckman Text Policy Center. Some big news out of Friod in Saudi Arabia this weekend. The new Crown Prince Mohammed been someone overseeing a anti corruption campaign, a consolidation of power. Some might say, we saw many members of the kingdom arrested, uh imprisoned at the Ritz Carlton in Riod for for an in definite period of time. Getting a list of who they are, Let's get some more perspective on this.

For there's certainly some economic and market impact from it from Mohammed Ali Akyah, who is with the Rafiq Career Center on the Middle East at the Atlantic Council. He joins us now by phone. What's just, broadly speaking, the import of all of this I mentioned this is a consolidation of power on the one hand, uh an anti corruption campaign on the other. Can they can they go together? Is it or the other? Um? That's a good question, Tom.

I think what you mentioned about generational change in economics is very important here. What's happening in a mix of everything. You can't remove politics from the equation when you're looking at the country that is undergoing an unprecedented transformation. Every rule is changing in Saudi Arabia right now. But what's most important is considering the economic complications of this anti corruption crackdown that's happening. You know, corruption has caused Saudi

Arabia many billions of dollars on an annual basis. We're talking about top level government contracts, private sectual contracts, we're talking about arms deals. It's a huge dollar amount that takes a toll on the Saudi economy. And this is why there's an economic compartment to brack down on it and there's economic benefit that's derived from this. We have Mohammed a romance of Saudi Arabia going back to warrants of Arabia and all the other stereotypes are wrong. What

will shift here in rule of law? Well, the laws have always existed against corruption and Sagirabia anti corruption commissions have been introduced time and time again from the seventies throughout the eighties and the nineties. But the difference that is happening today is that these laws, these pre existing laws are being used against the top dogs, the big wigs in the country, and that's the main criticism against

previous anti corruption drives. It seems to me that what the message is, the message that the Crown Prince and the new government is trying to send is that this won't be tolerated. There will be no half measures to fight corruption, and they want to stave office criticism that well connected uh top level princes and and and the

politicians are exempted from these laws. You know what, when I heard that the princes and ministries have been imprisoned at the Ritz Carlent Hotel and real I thought immediately of the event that was held there. Just a couple of weeks ago the Future Investment Initiative, several thousand investors and business people from Aroun in the world came to reod at the invitation there of the of the Saudi government. What's the message being sent here to investors is it?

Is it once counterinto if you have here this anti corruption campaign. But there must be a folks who are worried about the continuation of power and sort of stability of the country in light of all of this, Well, this is a complex issue. I mean, one of the biggest obstacles to foreign investment and business within Saudi Arabia in the past has been precisely this issue of corruption.

People don't know who to deal with, they don't know how the system of patronage in terms of corruption works, and and uh for for a very long time, this has been the main obstacle today. That's that bandit is being a torn off in Saudi Arabia. Will that create a sense of uncertain peo perhaps, But at the end of the day, the bottom line is that the message being sent is that corruption won't be tolerated and that sounds spelling is the name of the game going forward.

One final question and I don't say it is a joke. Is Saudi Arabia's event? Is the corruption so great that they don't have the wealth that we presume? I don't think Saturday it was solvent, so it was still indeed has a large foreign reserves and and enormous financial capabilities. But it doesn't take away from the fact that the corruption h cost Saudi Arabia a huge amount on an

annual basis. I mean the Deputy Grand Prince in Division twenty plan set out to resue subsidies, set out to roll back uh certain parts of of salaries in the private sector. If you look at the dollar amount that these policies gave the government, they would pay it in comparison towards cracking down seriously on corruption, I would save the government in a donor amount. Great pleasure to speak

with you, Thank you very much for the time. If we get long perspective on what happened over the weekend in Saudi Rabbi in reod that that was Muhammad Aliyakia, who with the Atlantic Council joining us there by phone from Washington, d C. And as I said, Tom, something that will bear watching. There's so much happening here with the present, trip to Asia, tax perform and all of that, but certainly in terms of geopolitical events, this seemed pretty seismic.

Absolutely 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 at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio