Surveillance: Battleground Florida With Rep. Waltz

from Florida, the sixth Congressional District. This is from Jacksonville in the south of Jacksonville down. He is the Congressman of Daytona Beach. Michael Walls, thank you so much for rejoining us. It was good to see you the other day. Your guy has to win Florida. Your district is twelve percent Hispanic. How does he get the Hispanic vote? How does he get the increase seen Cuban vote in Miami. Well, I can tell you he's doing very well with the

Cuban vote and the Venezuelan vote. For one simple reason, the words socialism doesn't doesn't ring too well with with that part of the Hispanic vote. These are people who have suffered personally, who have lost family members or still have family members suffering in Cuba, in Venezuela under the Madureau regime and under the remnants of the Castro regime, and the move by the progressive left, UH to actively say and advocate socialist policies and really driving Hispanic towards

the president and towards Republican Party. Well said, you've stated your case. Do you see any indication that Mr Biden of Delaware has decided to support the far left of the liberals on that matter or is he running more centrist? Well, I think he's been kind of all over the place, to be honest with you. At some point he was for the Green New Deal. It's on his website. Then in the debate he says it's not his plan. His vice president certainly is pounded the table for Medicare for all.

He brought in the progressive left into his working groups for healthcare. Uh. Look, government run healthcare is not the solution. Uh. Look at the problems with the v A, which I hope we'll talk about, which runs from the government twelve hundred hospitals and pres and yet still is not serving our veterans. That's the best example of where the left wants to go and and I absolutely do think that

will dominate Biden's policies. I'm sure that you want a debate in Miami just for bragging points for Florida and all that. The governor no doubt wants a debate in Miami as well. How do we do a debate in Miami that fits the realities of one candidate healthy and the other one rather ill. Well, the typical course of the virus in the quarantine, uh, should be done by that debate in another ten days. The president is looking much better, uh, and I think at that point will

be able to have the debate. They'll stay socially distanced. Their teams will say, uh, well, we'll stay apart and say distance as well. Very few people are going to be allowed into the room. But I think that debate is important for people to hear, and it's important per our earlier point on where the left wants to go in terms of what it calls democratic socialism. To have that in Miami in the midst of people whose relatives,

family members, and even themselves have suffered. Uh. There is a huge refugee population of Venezuelan population, that is that has been brutalized by the by the Madureau regime in Venezuela. And uh And I think that's a debate that needs to be had in a great place to have it. Congressman, I think we can anticipate one of the questions that will be host next week, and I do want to I'd love to here what your response to this question

would be. If someone posts the question, if the President can't keep the White House safe from COVID nineteen, how did you protect the country. What is the answer to that, Congressman, Well, look, I think the President has kept the White House safe for the for an extraordinary amount of time to this year. I've personally been in and out a number of times, on and off of Air Force one. Uh. Look, at the end of the day, no one said that this

virus would never spread. Uh. The goal was to flatten the curve, to get a hospital system that could to buy our hospital system time to handle it and not become completely overwhelmed while we march towards therapeutics and the vaccine. Uh So, if those were our goals which we have to which we have to keep an eye on, I

think we have largely hit those. Meanwhile, I do think Biden needs to be held accountable for uh, for not wanting to shutdown from China, for not wanting to shutdown from Europe, for calling them policies zeno phobic, and for himself and his advisors early on not advocating for some of the stronger policies that the president put in place. I think cossmen going on here in terms of what he would have done had he be president. And again, that's what debates are for, and that's what's going to

come out. Congressman, just real quick, do you think that President Trump has handled the own virus in his cabinet for himself well, given the fact that he's currently uh displaying himself not wearing a mask and going for what some people have called a joy ride in front of

his supporters with Secret Service members in the same car. Yeah. Look, so there's there's a big difference when you have the luxury of just being a candidate versus when you have to govern and when you have to lead, and you have to lead with agency and cabinet heads that have to leave the Defense Department, of State Department and others. UH and and other critical departments. You have to be out there. You have to find ways to walk and chew gum. And I think that's been the President's message

all along, is we cannot go to shutdown. It's just it's just not a responsible policy. We were talking about veterans a moment ago. You know, we're seeing a twining spike in veteran suicides just in the last year because of the isolations that are are getting put in place by mandatory shutdown. So I think the President's messages we have to find ways to say if we do both, we have to find he has to govern and to lead. Uh and and I think that's what he's been trying

to do. Congressman, fantastic to have you on the program today. Hopefully we can have you back soon. Thanks for giving us your time. Congressman Michael Waltz there joining us on the latest. Waking up after sleeping for the last four months or so. Peter Chick, Academy Securities, head of macro Strategy. Peter, now you've been paying attention. Don't worry. I'm just joking. Let's stop with this bond market and treasuries in the

action of the last twenty four page tour. In your view, was it a data the I s M better upside surprise? Was it the president's health seemingly according to his doctors, on the road to recovery, or was it the polls and the polls this morning as well. I think the polls are certainly helping because of pushing us towards stimulus. And I think the reality has no matter who wins, we're gonna see stimulus. We're gonna see more quote unquote band aid stimulus, like we're seeing where they're trying to

make people whole. But the market is starting the price in that. We're gonna see infrastructure stimulus. We're gonna see real spending that is going to drop a lot more bonds into the bond market. It's already been having some trouble digesting bonds for the past month in the treasury market. So I think you see the ten year ago to at least one percent, maybe one and a quarter percent. I'm looking, Peter at the failure of two yield rallies since March. In the land of point figure, it's called

a double pole high top. It's really an ugly a thing. We go up and yield and then we go down and then we go up been yield When we go down again, what does that signal to you? I think that we've kind of hit the limits of where we can get into terms of lower yields. So that's another reason higher yields. Also, when we had that stock market volatility recently and we are down on stocks, treasury is barely budged, yet another negative sign that that's not going

to take much to push yields higher. And then finally, I know the move index, which is an index that really looks at implied volatility and the treasury market. I know it's a little bit wonky, but it's been very very low, telling me that people haven't been hedging any sort of interest rate risk. So again another reason, I think we're susceptible to a fairly rapid move to one to one and a quarter percent on the tenure Peter. That sounds like a lot given the stasis we've seen

in the bond market recently. Will that get the Feds attention? I don't think so. You know, I think above one percent they start paying attention and then they maybe start doing things to ensure that we don't get above one in a quarter. But I do think if you look at the FEDS messaging for the past month or two, they would not be unhappy to see slightly higher yields and a steeper curve. Right. I think the FETE has done in much much better job than the ECB trying

to ensure that banks can make some money. Right, we are not going to negative yields. I hate negative yields. I think they're the worst thing possible for the economy. So we're not gonna get negative yields. I think the Fed actually wants to see a steeper yield curve, and bizarrely enough against very very circular. But they talk about inflation expectations. That's a calculation from that anyway, so it suits their agenda. We'll pay to tell that to the

Cleaytland Fed. Laret Amesta out yesterday saying quote, I can imagine wanting to shift to longer term treasuries as we did during the Great Recession. How do you frame that one? I think they are going to be very careful not to let it get above one and a quarter percent. So as we start seeing higher yields or model higher yields, I think first the FED will step up buy more treasuries. Then we'll go back hearing a little bit more about yield curve control, and I think we are stuck in

this world. We potentially see real negative yields in the US, you know, very negative. And that's one reason I remained barish on the dollar. Is any inflation, which would normally express itself in higher yields is going to be camped down by the FED and money is gonna have to find itself somewhere else, So it's going to express itself in dollar weakness. So inflation is going to be dollar weakness,

not higher yields because of the Fed. Does it matter to you, Peter is a market guy that the economists are partitioning inflation among goods and services. Goods inflation, maybe service sector looks like substantial disinflation. Does that stuff matter to you? It does a little bit. But I think

over the long term we will see an equalization. I do think if we get this infrastructure spending for the first time in a long long time, we might see some real competition to hire mid level type employees, people who can manage plants, people who can manage production facilities, and that could actually create wage inflation, which has been

really lacking for the last ten years. So, given the fact that you do think that bonds will sell off, do you think that it is inconsistent for equities to continue to rally in tandem or do you think that they will continue uh their rush upward based on this extra support fiscally as well as an improving economy with

the end of the pandemic. You know one thing, I'll say It's probably gonna sound crazy, but I actually like dividend stocks, and dividend stocks would normally do poorly as yields are rising, but dividend stocks did not respond at all for the past two months to low yields. So I think you're gonna see a little bit of a normalization, almost what I'm calling a reversal trade. I would have called it a reopening trade a couple of months ago, but we moved so far beyond that, I think it's

a reversal trade. I do think big tech is particularly susceptible. Depending on who wins, they may be a target for paying a lot of the bills, so I'd be a little bit more nervous there. I continue to like the performance that we've seen in reopening I really like the fact that the Russell two thousand has been doing well of late, So I think we could see a real strong, smaller company, domestic focused rally for the next two months as the spending company. To let's separate these issues out,

because we standed can flight two different issues. I think there are events that squeeze positions and there are events that drive durabile change. Now, the thing that pay put a worried about going into November is that we don't have a result. The thing that squeezes positions is that we do have one. That's the somebody, the who that is what drives dura will change. Now, if somebody wins i e. Biden, you get a democratic sweep, that will

squeeze positions. I would argue the other side as well, if you've got a red wave that was squeeze positions too. But what drives durable changes, that's the person the policy. Are we confined in the two issues at the moment, I think a little bit. But I think when you really look beyond the message, and what's going to be most important to me is will we get fiscal stimulus, will we get infrastructure spending, Will we try and rebuild a manufacturing base, and to me, the messaging from both

sides is actually very similar. So if I think about what's going to be the most important next year is do we drive fiscal stimulus, I think the answer is yes. Regardless of who wins, how we pay for it might shift a little bit, but that's kind of why I'm very optimistic, and I suspect that at the end of one we will have a better job situation in the US than we had at the start of pay A cash offs. As always Piotr Academy Securities had a macross strategy.

You got to be in the market to play in the market, and Robert Dahl of Moving has done that for years. Bob dal joins us this morning. Bob, how do you stay in the market here with all this uncertainty? You recognize that the underlying economic fundamentals and therefore earnings were in a reflationary period. You all just summed it up very well. In the West, You're doing great, You're doing great. You see, we're about to get amazing third

quarter g d P. I know that's history. The good third quarter earnings, reasonable outlook for the fourth quarter, fiscal policy package or not. We're seeing precious medals. We're seeing industrial commodities moving up. We're obviously the stock market cyclicals are beginning to do do a little bit better, and even the bond market is waking up to say inflation is not gonna be zero forever. What'd you make of the relative still right now, Bob, between Europe the United States?

Three months ago, the happy talk around Europe was almost defini and they don't hear much of it anymore. And the momentum, relatively speaking, is not in Europe right now. It's in the US, Bob, no question about it. Our economy came back faster because our policy, mixed was gargantial

and fast. I mean, you can't find another period in history monetary and fiscal policy was this quick and this aggressive, and that has buoyed our economy and getting got us out of what could have gotten to be a longer and deeper recession when we shut the economy off. And that's why the US is doing well. So I sense where you want to be the United States over potentially Europe. Let's talk about where in the United States you'd like

to be. Yesterday we saw that internal rotation that the likes of JP Morgan, Government, Sacks and others are talking about that moved to the cyclical parts of the equity market. Bob, why do you think we can have a sustainable move there and not just a position squeeze. Well, there is some position squeezing going on, no question. I think it's not an either or. I think it's a both end.

If you've been successful in equities, you've had you know, technology and healthcare, and not many small stocks and not many cyclicals until the last few weeks. Now it's at both end. We had to run, for example, in financials yesterday today it might be the tech stocks coming on again. We've had this rotation with an upward trend that's going to continue. I like some of the consumer cyclical names, the best buys, Low's targets, even the some of the

home builders. I'm not giving up on healthcare. I think they're there there, There are good news they're regardless of who gets selected. The stocks are not expensive, so they're the places I would camp out. Where's the cash flow? Can you reinvested for some growth? And are you doing well and making up money and cash flow in an environment that is post coronavirus. But the most read story on the Bloomberg yesterday. How to do with Wall Street analysts saying that a Biden win could be a bull

case for US equities. And there's a lot of pushback, people saying it's just people going with their political beliefs. But Bob, do you adhere to this narrative that a Democrat sweep both of the of the Senate, the House and the presidency would be positive for markets? Probably initially, yes, because we will get a fiscal policy spending that will buoy the economy further, probably more than of the re election of Donald Trump, particularly if it's a mixed congress

in that sense. Longer term, you know, if you're gonna have tax increases, are gonna have reregulation, that's not great for the market. So there could be this within the air of the positive reflationary trade, as I mentioned, getting a goose the bit from some fiscal policy spending, and

then people will wake up and say not so fast. Well, and this has to do particularly with tech stocks, big tex stocks, because not only do you have an increasing antitrust sentiment that is growing certainly among the Democratic Party in Washington, d C. But as you said, the talk tax changes that Joe Biden would implement would disproportionately hit big tech companies. According to analysis by Bank of America, would you go underweight tech in a Democrat suite? I

wouldn't go underweight. I would probably have less in a Democrat suite than I would if if the president is re elected, but I wouldn't go underweight. The underlying growth is just so powerful. COVID was a positive for the tech sector. Look we're gonna have under either administration continued queries of those companies, and look at Camel's nose under the tent. The government wants more money from these companies, and they that will hurt the multiples. I'm not sure

it's going to hurt the earnings. Hi, Bob, great to catch up, sir, don't leave us along next time. All that ve chief eculty strategist, Thank you very much. Right now is something very spiritual. She is Carla Harris of Jacksonville, who never said no. Starting with the Radcliffe Choral Society, she carved out a singing a legit singing and music career, including wonderful appearances at Carnegie Hall, and in the meantime worked for Morgan Stanley. She is now Vice Chairman and

Senior Senior Client Adviser. We're thrilled that Ms Harris could join us this morning on things Wall Street, but also things of this society in America right now, Carla, is a spirit that got you out of Jacksonville to Radcliffe. Is it still there? I would have to say it's very much still here and the live and kick it. Tom, how are you this morning? We're very good, wonderful to have you with us. I'd like you to interpret for us what Wall Street can do to allow a nation

to heal and move forward. Yes, I'll tell you. One of the things that Wall Street can do it as providers of capital, is to make sure that those who don't have equal access to capital get that access. And that's one of the things we've done in Morgan Stanley. As you know, Tom, we s thought of the Multicultural Innovation Lab four years ago and I'm so excited today

because it's our demo days. So that's the big coming out date where our companies, the nine companies that have been in the lab will be will be shown to investors. And we know that here through the acumen of Betsy gray Sick looking at banking and of course then there's Ellen Zettner who's been killing it as well, and economics. Carla Harris, I want to know what we need to do to get the mathiness of your degree in economics from a Harvard How do we get women, how do

we get minorities engaged in the joys of microeconomics? Well, I'll tell you a lot of it is access to education, as you know, and then access to opportunities and the entrepreneurs that are out there. It's around access to capital because, as you know, women get less than three percent of traditional VC dollars and people of color get less than two percent or one percent, depending on your source. So I think that what we can do is to make sure that they know where the capital is and give

them a fair shot. And many cases, these entrepreneurs have already been de risked by the time we even see them because they've had such a much tougher journey. Carl Harris, why have we been so bad at actually providing that, you know, that capital to people that needed and really

be a turning point for this. Yeah, if I want to be constructive, I'll tell you that the reason that we've been bad at it is that people like to lean on the excuse that they can't find any But that's one of the things that we've been trying to fix through our podcast, Access and Opportunity is to highlight some of these great entrepreneurs and the highlight those have

already invested. Because the more you put data out there and the more you elevate the conversation, I think the more people will start to say, we're wait, there really is something there. And the companies that we've brought into our lab have gone on to raise over thirty million dollars after they've been in the lab, which means we

have been successful in raising the level of visibility. And today we have over fifty four billion dollars that will be represented among the investors that have come to our virtual Demo day. Um Carla Harrison, I rememb're speaking many years ago, actually took are seeing the garden. She would go around when she was at the I m F speaking to heads of state who said, I would love to find a woman to fill that job as finance minister,

as environment minister, but they're just not there. And she would show up literally and have a list and say, well, here, I have a list of names that you could look at how can we incentivize people on Wall Street to do more? Does it have to be does does diversity have to be part of their pay package? Well? I think it. I think it has to be a part of your intent and your objections, no objectives, no question

about it. Because if you want to avail yourself with the best talent, you have to avail yourself of all the talent that's in the marketplace. And that's really the

hallmark of good leadership. So I think you have to be intentional about making sure you have the first thinking at the table or you're gonna have a gap and you go to market strategy and expose yourself to competition in a way that you never have before, especially going forward with millennials and zars really caring about this and Ms Harris, we are learning so much in this pandemic, all of us. It's been actually really humbling. Just as one stupid thing, I using a lot less paper than

I did before this pandemic. They're serious things that are out there, and I would suggest the major constraint now is it's been for decades, is the childcare in this nation. It's a major constraint. Jamie Diamonds talked about it at JP Morgan. I'm sure James Gorman has Morgan Stanley as well. How do we get to a childcare program that mimics

selected other developed nations. Well, I'll tell you many corporations, including my own, have created programs for working parents so that they will have places to keep their kids, or they'll have people that are available in emergencies. And I frankly think on the other side of COVID nineteen you're gonna see more and more companies think about a way that they can be innovative around childcare. So you bring

up a very good point up Carla Harris. From where I'm sitting, which is not in the US, it's really quite you know, difficult to see a United States that's so divided ahead the election on all sorts of front what's the prescription for going forward? Well, you know, I I am certainly a glasshouf fool as kind of girl as you know, and I do believe that on the other side of this global pandemic we will find a

way to come together. I think that's one of the reasons. Frankly, if you really want to get spiritual about it, this has descented upon us to really make us focused on the fact that we're all interdependent and we all need each other at the end of the day. And this is the first time in my lifetime and probably in yours, that this has been a common experience. And I'm hopeful that because it's been a common experience, we will come

together and find a common solution. And you're right, it's hurtful to see the divide, but I think you know, on the other side of this, we'll find a way to get together. How will it reshape Wall Street? How will it reshape how we work from home or not? What do you see as as a lasting legacy of COVID nineteen. I think every company will have to rethink it's it's real estate portfolio, how they work, how efficient people can can be with the right of technology. I

think companies are seeing that for the first time. So I think every company across every industry so of rethinking what do we need to look like, what's our optimal size? You know, how can we enable people to be even more productive and more importantly more innovative if they're not in the same space. And the big question is how do you create and drive culture when you aren't under the same root. That's the big question, Carl. What's the question you get the most by clients of Morgan Stanley?

What do they want to know about? What kind of economy, world building? What kind of social cohesion will be post Well, the biggest question that that I've gotten, especially as a public speaker, is how do you lead when you're not in the same space? You know? How do you drive productivity? How do you keep people comfortable and focused and and and really driving in the same direction and maximize your productivity?

And frankly, what I've been saying to leaders, especially when we went into this shelter in place protocol, there's three things that you must do. Number one, you must be visible. Number two, you must be trained parent about what you know and what you don't know and more importantly, when

you know it. And number three, you must be empathetic and and that will allow you to create some stability and some certainty when people are craving stability and certainty and you're not in the same place, and if you are authentic, which is number one, then they are apt to follow you into this uncertain environment. Dependentic will also hurt women more than than men. It will hurt you know, being people more than why. It's how do we address this,

how do we rebalance this? Well, I have to tell you I am not of the mind that it necessarily will put people out of disadvantage women and people of color, because this is the first time in many ways that there's a level playing field. It used to be if you're in the same place, you know, maybe someone share they went to the same school, or they golf together, and you might have been intimidated by approaching the leader because you saw them talking to someone else and you said, well,

I don't share playing golfer. I don't share having gone to that school. But now everybody has to communicate in this way, so there is a level playing field. And so now it's really about your own initiative to reach out to someone and say, Hey, Tom, I wanted to have a conversation with you pre COVID. Can you give me ten minutes on a zoom I'd like to walk through three or four things again, talk about my career.

So now you can be very focused, very intentional, and you can connect in the same way that everyone else is connecting. So I actually think this has created a bit of a level playing field, but your initiative must drive the connection, no question. He ever off to Miss Carla Harris. Thank you so much for joining us, Ay Morgan Stanley, Vice Chair and Senior Client Adviser. 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 Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.