Trump Would Undercut U.S. by Ditching Paris, Whitman Says

Bloomberg dot Com, and of course on the Bloomberg. Let's kick things off with Brian Levitt, senior investment strategist at Oppenhammer Funds. He joins us here in our Bloomberg eleven three oh studios. Great to have you, Thank you. Good Martin with us so much here that we could we could talk about Le's see where it t Let's start with job stay tomorrow. Fascinating interview with James Gorman and

Morgan Stanley yesterday on Bloomberg Television. Our colleague Tom McKenzie and in beating speaking with with him, and he said, quote, the dirty little secret here is the US economy is doing just fine. From where you sit when you look at the U S economy. Is it just fine? It is just fine, and it's been just fine for a long period of time. Now I think by now investors

would have hoped for better than just fine. And I think you know, the U. S. Election, when we heard candidate Trump speak on the campaign trail, he would talk of three four or five percent GDP growth, and you know, in the aftermath of the election, there was hopes for tax cuts, fiscal stimulus and the like, and you know, again, three four or five percent GDP growth. The reality is in the first quarter the US grew at something like one point two percent on an annualized basis. And in

general we've been saying it's a two percent economy. And you know, a two percent economy has been quite good for equities, but for workers, Um, most people that want jobs generally confined them are there? Are there wages going up? Not significantly? So just find David, I think is right. You're right that the FED is an a predicament. It's an interesting predicament here going into the next MCY meeting in June. What are policy makers wrestling with and how

do you think that's gonna come out? So there's the there's a psyche. There was a psyche of zero percent, there's sort of now there's like the psyche of one percent. The reality is, at some point in the future the United States is going to have an economic cycle again, and so the Fed would like to have room to reduce rates for the next recession, next economic cycle. Here's

the rub. The problem is the FEDS looking at this and saying an unemployment rate below five percent, wages growing to two and a half percent, credit spreads are tight, the dollars weaker. You know, we're not seeing big capital outflows from the emerging market, so why not now? When else can we do it? The problem is that the long term bond market is not latching on to any

type of reflation trade. So two point two percent on a ten year treasury is consistent with a two percent real GDP economy, and there's not that many times you can raise rates further without further flattening the yeld curve or maybe god forbid, inverting the yield curve, which would be a harbinger of worse things to come. So that's the rub. As you listen to the course of committee members Robert Kaplan talking to Tom yesterday, the counseling for

Relations level. Brandard speaking earlier this week, the most de wish of the doves UH is their consensus forming here do you do you think you have a good sense from what they've been saying of what the Fed is going to do when it comes to the balance sheeter when it comes to the next rate increase, Well, I don't think we see consensus. If you look at the FED dot plot for mid eighteen, it's it's a huge

band and the medians probably around two percent. So unless you get the long term bond yields up with either some stimulus or heightened inflation expectations, it's gonna be hard to get FED funds to two percent, especially when you're trying to scale down a four trillion dollar balance sheet. Now, I don't think that the four You know, in early on it was what's gonna happen when they have to sell all these mortgages and treasuries into the market, and

that's going to be massively disruptive. That's not going to happen, not at you know, two percent inflation or one and a half percent inflation. What's going to happen is those securities are going to mature, and the Fed's not going to reinvest principle. We've never really done that before. The history books didn't teach this, so it's it's on precedented. So I think the Fed is going to be cautious on FED funds more deblish than expected as they scale

back the balance sheet. Brian love it with this with the Uppenheimer. You know, I've been you and I've had fun this morning talking about to see if the exam. Good morning to all of you taking the the what is it like four million people take the exam? Kidding anyways, you know we'll talk a lot about this is We're gonna job to day tomorrow to see if exams on Saturday is well. One of the great fundamentals here of

those exams is linking equity markets to bond markets. The fact is, as you mentioned, it's not in the textbooks. You can't do that now because you don't know where the risk free rate is. So what are your portfolio managers do? Well? I think it's I think simplistically, we can still look at the earnings yield of the broad market and compare it to a ten year treasury rate. Now, you know, people like to look at price over earnings.

You flip that over earnings over price. I don't have the exact numbers, but say the SMP five hundreds at two hundred earnings are around a hundred and ten. We call that a five percent earnings yield, give or take. For those that can do the math in their heads, I like that more than two point two percent on a treasury yield. So it's unlikely that a bull market in equities is going to end with stocks being this cheap to bond. Stocks historically are a better asset class

than bonds. I think over any five year period, stocks outperformed bonds about eighty five percent of the time. So I think we can still look at that. You know, the short of having a risk free rate you can consider. Some might say the ten year rate is too low. Um, it's been overbought. I would say compare it to the

nominal growth rate of the economy. Even at two percent real yield, Even if you can get one and a half two percent of two percent real growth, even if you can get one and a half two percent inflation, stocks are still cheap to nominal growth. In this country. You see catalysts on the horizon, things that could kick start econmy change the curved to something different. I mean, how how pasimistic are you about seeing a catalyst in

the near term. I think it's increasingly unlikely. I think it's you know, tax reform is difficult, even in the best political environments. Um, even when Reagan got tax reform two years after his historic electoral College landslide, there were an awful number There are a large number of Democrats that were involved in that tax reform, including people like

Bill Bradley. So you know, these things are difficult, They're hard to do, and we're dealing with the reality ease of governing right now, and those realities never go away even with single party where all do you deal with the realities of just figuring out what's going on or not going on In Washington, d C. We're talking with a Stan Collinder, who is an expert on the federal budget yesterday and he was up in here in New York being with clients, and he said he's just astanded

by the disconnect between New York and Washington, and uh, you know how there has been so much optimism that things are going to happen in Washington when he's pessimistic that they that anything's gonna happen. How do you deal with that? How do you keep apprized of what's going on? How do you how do you develop the calculus to understand what's going on. Well, the first thing I said, and I think I've said this on this program before, is that hating the government is not an investment strategy.

So I said that during the Obama administration. I'm now saying that during the Trump administration. The reality is, if you go back to the Kennedy administration, markets actually do better when the president's approval rating is below fifty. So we don't have the I did not know that we don't have to like the president for the markets to go up. Did you take that from CF level? It's

really I did not know that. That's amazing. It is on the test and my colleague on the other side of the glasses studying right now, So so are you really studying in there? We have a bulletproof glass between us, say sometimes fire Artis and ken Felli will get the get the sub machine. Can we drop his name, Tom please? Drew Thornton on the other side of the glass, he is studying for the Level four derivatives how about forward

market forge? Okay, so you know, I think for investors, for investors that have a broad, long term, consistent investment plan, they should not get caught up too much in the political theater taking place in DC investors trying to figure out it. From an earnings perspective, we should be looking from the bottom up. We should not be expecting broad stimulus of the fiscal kind that we haven't seen probably since two thousand nine to be the driver of earnings

going forward. Just turn to the FED here quickly and the balance sheet as they wind that down. Do you think it's gonna happen fairly, stamelessly? Do you think that they are going to communicate adequately about what's going what's your what's your what are your expectations about how it's going to happen? Well, again, it's unprecedented, but my instinct is that they are going to be able to manage this, that it is going to be a very prolonged, drawn

out process, gradual slow of allowing security. Critically, I couldn't get an answer from Robert Kaplan on this the how long part? I wasn't looking for, like, you know, the third week of August here we're looking at decades. I'm with you, I mean law, I don't think the market and the zeitgeist understands. This isn't about two or three years. This is not about two or three years. We've got it. This is a law there is and he made clear this is I love his phrase, Brian managing the choreography,

original kaplan idea exactly. I love it exactly. But you're seriously, you're at decades. I'm at decades. You think of the maturity of the securities on the on the balance. Brian Levin, thank you so much, and congratulations on your support of New Jersey Institute of Technology. You know you're on some board up there. They're one of our great sponsors, and they've really really helped us along the way with our

STEM report. So I can make a joke folks about getting wonky, which we're going to do year, but it's unfortunately no joke because everyone listening is part of the game of thrones, like religion of dividend growth, Brian Levitt with us with Oppenheimer fun, dividend growth is the bet and the future dividend overwhelming yield issues and overwhelming valuation issues. How far out are we buying that growth? Are we

out one year? Are we out two years? When I buy a quality stock like something in an Appendheimer Funds portfolio International or not? Are we so desperate that we're buying year five dividend? I think I think we are, UM, and I think that you know, investors continue to search, work for yield wherever they could find it, and they found a little bit of a come up. And with that when interest rates rose last summer and we're climbing

um all the way through the end of the year. Now, of course this year we've seen rates come down and dividend strategies have done quite fine. My my view on dividend strategies, on low volatility strategies that if we're in this slow economic environment, um, those types of strategies can do fine. My concern is if investors don't right size that position accordingly, they should have some caution. Um, you know, the downside could be worse at some point than the

upside is. From here, look at Europe just a little bit. Here, we're focusing a lot on the trans atlantic relationship, American leadership in the world in light of what we expect to hear today from the President of the Rose Garden on the Paris Agreement. What's your attitude generally towards investing in Europe at this point? What's attractive to you in Europe? It's actually a great part of the economic cycle in Europe in which to invest Investors have been asking me

for years. Is Europe two years behind the United States? And and presumably that meant with regards to the financial markets. If you look at it from a credit cycle perspective, given all the austerity forced on the peripheral country's rate hikes in twleven, Europe is probably more like six seven eight years behind the United States with regards to their credit cycle. We're only first seeing credit growth in twenty

six seventeen, So that's good news, David. The This was supposed to be the make or break year for the European Union, the common currency, and one by one the elections have gone in favor of the pro europe candidate, and we've seen that in Austria and the Netherlands, um in France, and less in favor of the euroskeptics. So for those investors that didn't want to be positioned because of the politics, they've missed out on what's been a good economic recovery in Europe. In fact, European growth in

the first quarter better than US growth. And this is a typical Offenhimer Funds question and broader, bigger view of management. Are they becoming more Anglo American? They they are, And I mean there's a lot of great companies in Europe um doing a lot of great things, involved in a lot of industries where they maybe the one or two largest players within that industry. So, you know, for investors that didn't want to be there because of politics, because

of the strong dollar, that has now all abated. And you know, we we aspire as consumers to a lot of the products that the Europeans provide U, but as investors we tend to shun it. And I don't think that that's an appropriate investment strategy. That home bias is probably too persistent in the US. Are the politics entirely

peripheral now in Europe? Are you able to look at valuations in a vacuum or or are you still concerned about what might happen to Italy, say, or what might happen in two weeks, two weeks, not even two weeks a weeks time in the UK Well, I, I like political uncertainty from the sense that markets like to climb a wall of worry. When when we get to UH absolute clarity on politics and policy, that's probably when we should be concerned about markets. Now, the UK is a

little bit of a different story than the continent. If if we were to stick to the continent valuations, if you were to look at it um on a on a trailing twelve month earning basis or it is not, you wouldn't say this is screaming attractive. But what you have to realize is that that denominator has not improved in a large in a number of years broadly, and we're seeing that now cyclically in Europe. Brian Levit, thank you so much with Oppenheimer Funds joining us at Europe.

Andrew balls right now with Pimco UH an important and timely conversation. Andrew I, I we should note that your brother has been involved in the United Kingdom politics. I don't want to step on family territory. What is your reaction to what we've seen in this abrupt change in the election in the United Kingdom? Could you give us an observation on that? Yes? Great, Thanks for having me today. So UM, So you you started up with a very um big lead for the Conservatives, it's um, it's it's

shrunk a lot. I think that's why you would have expected UM, and the UK polsters have have done a pretty poor job at the time. So I think the baseline is um is that we're going to have a conservative government and that racer may will increase the majority, which is what we expect to going into this. But that said, there's an uncertainty in the polls, and you know, the campaign is not gone, gone very well. They had a major commitment in their manifesto, they reversed it a

week later and I think that's ever happened before. So I think in spite of it, what's not been a great campaign. You know, expectation would be conservative government, increased majority. But there's a lot of uncertainty. But you weren't right where I knew you'd go, which is and you can't help us with this. You've got the ability on this. How do you poll in a parliamentary system. I mean, it's not like polling in the United States is no,

and the the other thing in the UK is um. Traditionally, conservative voters don't want to say they vote conservative in a pent of the cases, so the posters have to make adjustments for what they call shy um the Conservatives. There was an effort by one of the pollsters published this week where they went constituency constituency, huge areas around it. But what they do is they look at what happened last time and they are just based upon the national polls for each seat. But they did they did a

lousy job last time around. So from our perspective, we don't have a lot of risk riding on this. But from our perspective, the most likely thing is um um Conservative majority, um and um. That's what we are assuming. But it would be interesting if you had a hung parliament. There's the Brexit recommend the Brexit negotiations ready to start. Ending up with a hung parliament trouble forming a government would be a pretty awful way to start these Brexit negotiations.

Andrew Brows, thank you for doing at the General Council of PIMCO. Just aged David Grew jump in here and get Mr Balls on it. Yeah, you're out with your global secular outlet. Let me just ask you, how is an investor you're watching what's unfolding in the UK. And we were talking earlier about the degree to which politics is perhaps after skating the health of the European kindly just give us your your outlook on on where you're ups headed here in the next six to twelve months,

So the UK, So start with the UK. The it looks okay. We slowed a little bit, but overall since the Brexit referendum a year ago, it looks it looks pretty good. You've got you've got a lot of uncertainty m in the in the outlook, um we you know, the level of interest rates looks too low here compared with the US um um. So I think over time we should see higher rates in the UK. You know, I want to get paid more to own UK interest rate risk than I do in the US. But we haven't.

We haven't seen Brexit before obviously, and so these negotiations they could have a big impact on confidence. But so far it's been okay. On the European side, you know, by European very low standards, things are going quite well. Um um. The the year Zone has been growing above above its potential for a couple of years. We expect that to um continue um that there. They've been a long way behind the US and this recovery. So this

is what should be happening. But you know, my former Cully pot Colleie Paul McCully used to say, you know, Europe there's kind of nashing at teeth one percent to Nirvana at two percent. We're a bit closer to two percent at the moment. It is good fortunately of Andrew balls with us of course with Pacific Investment Management Company PIMCO and their chief investment officer Global Fixed Income. Let me ask you the basic question, Uh, Andrews, you will give last rights to see if a test takers at

PIMCOT here in the coming two days. Where's the risk free rate? Right now? Do you have a clue where

is the risk free rates? So the risk free rate is in the US, you know, i'd look at US real rates or US nominal rates, and we've just had our our annual secular Forum, and in that regard, we we think even you know, just above two percent, US US rates look look broadly anchored for the next few years based on our new neutral view on the FED that the FED is you know, maybe gets to two percent or a little bit higher, but it's not gonna be going much further than that in the next cycle.

So low level of yields, but pretty well anchored given the growth outlook and the FED outlook. I was struck by the probability you placed on the likelihood of a recession here in the next five years around seventy percent. Walk us through your your thinking pimcost thinking on that. So if you have you know, something like a twenty percent chance of recession every year in the US, given the the kind of the frequency of post war recessions,

then you can get to that kind of number. Now you need to be careful because we could always be negative based upon expectations of over three to five years of recession. But in this case, you know, this is a long expansion we've had in the US. It has been quite stable the last few years. You don't see a lot of imbalances UM, and the FED is not going to be trying to kill this um recession by

very aggressive monetary policy. But over three to five years UM, that kind of longer term time frame, then there's a good chance we get a slowdown and recession in the US. And it's easier to get there when you start at two percent growth rather than the uh, you know, the three or four percent growth that the Trump administration has has has talked about. So you have this this secular form you meet around the table Larry Summers is Therey

Jean claud Trichet Emory slout of the rest. You moved from that to investment strategy, and I wonder sort of what conclusions you came to in the second half of that meeting. Is the focus still going to be here on capital preservation? It is, yes, so so a three to five year out look, so it doesn't change every year. Um, it pivots from time to time, but similar view, so that we see an outlook which is pretty stable, but

we see it as as insecure. There's a lot of challengers in the US, in China, in the rest of the world. Um. And then the big thing which has changed over the last year is risk assets have all done UM so well so so credit it looks fair, but you don't have any excess risk premium there for that. Recession risk or other challenges are the other reasons why

we might see higher volatility. So preserving capital is always important, but this is an environment when preserving capital, we think is a good idea and then grind out the alpha, the relative value positions, the boring stuff which which helps us to outperform. What's the danger of high real yields in Asia? You know, cue the Twilight Zone music. You must have young bugs of pimcore. You have to say, be careful out there. High rail rates in Asia. You want to go buy paper in Asia where you get

a nice coupon, but what's the risk. Well, so when you go to the government markets in Asia, the coupons the heels aren't that high. When you go to the credit markets, if you're going to go to high yield, then you can find some some good opportunities there. But it comes with a health warning, which is you don't have the transparency in terms of the reporting, the regulatory environments that you have in the in the US. So you need to be able to do that that deep

credit work. So it's an area, well, we'll find opportunities were actually investing in that area, adding people in that area. But you you know, if you're investing in Indonesia, you need to know how that works. The shareholders in the company. Less transparent markets clearly than you have in the US. Quickly here, let me just ask you about trade. We're

talking with Gary huff Baron just a moment ago. How real is that risk here in the last three seconds we have with you trade risks, I think a real when so stable but insecure is the the outlook. And one reason for insecurity is, you know, a less predictable US administration the potential to launch aggressive trade actions versus China or versus other places in the world. So this is one of these pivot points, one of these things

that we need to guard against. The other big one, of course, tightening central bank policy over the coming years. Andrew bar is great to speak with you. Thank you very much. Andrew Boster, Global Fixed Income Chief Investment Officer at PIMCO, joining US set from London where he is based. Valuable perspective there on pimcoes new global secular outlook. I'll tell you it's an interesting time June one. Where where did it go? Believe it? Yeah? I gotta start like

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Download or io s app or search for the Bloomberg extension at the Rome Store to try lends out. Learn more at bloomberg dot com, slash lands Okay, joining us now the former Governor New Jersey and force at a different e p A from a different time. What a perfect time to talk to Governor Whitman of New Jersey. Governor, good morning, I assume you're not going to be at the Rose Garden today. Frame frame What all of this

means for Republicans who are to be polite pre Trump? Uh? Well, I think it makes their position actually a lot more tenable because if you look at every poll, even within the Republican Party, better than Republicans believe that climate change is a real issue, that humans have a role to play,

and that we should be doing something about it. So this kind I don't know, we don't know what his final action is going to be, but clearly he is considering he doesn't consider climate change to be a major issue. My approach here is, look, timate change is caused by what we're putting into the air, which is not good stuff. And we have some two hundred thousand people in this country a year who die from dirty airborne related causes.

So if we just clean the air, a will be doing something for climate change, would be we'll be protecting human health. What really worries me about what the President is talking about is it undercuts our position in the world. We are seeding leadership in this Others are going to step up and fill the vacuum, and we're going to see many of our company's trade wars work both ways.

And while many companies have already adopted very strong UM guidelines to reduce their carbon emissions, uh, they're still from the if they're headquartered in the United States, they could be subject to retaliatory trade worth. It's just unnecessary and it's too bad to fly in the face of something that people have worked so hard on accomplishing. And you have almost two hund countries that have signed it. In fact, we would join only North Korea and Nicaragua and being

non signers, would you learn when you would? Washington d C. About long term is um the difficult of planning for and crafting policy that takes a long term perspective. It strikes me with climate change policy in particular, you're getting people to buy into something that is going to take place maybe not a year from now, two years from now. Yes it's happening, but it's it's a naggregate that we care about, and it seems like that's that's something difficult

that's still to sell them any Americans it is. You're absolutely right it we don't think in long term. We think in short spurts. But that's why if you go back to annual lives lost from dirty air, you can perhaps make a more compelling case for people to understand this. But I would say that frankly, the weather um is something that's already impacting people, and they're getting it that things are changing. They don't necessarily know why, and we can't say that humans cause all of it, or that

it's all due to climate change. And certainly the climate has been changing since the Earth was formed. But they're seeing these storms become more frequent, more severe, and not impacts them directly. So there there are these short term implications that are beginning to pop up, which is why I think you see so many people say this is real and we should be thinking about how we're going

to cope. And there was a piece set by one of our colleagues at Bloomer BNA a couple of days ago about the Committee on Energy, the Committee on Environment and Public Works US Senate Committee Environment Public Works, John Barrasso, the Senator now in charge of that, and it seems like the focus squarely is on public works and not on the environment. I know that's something that you butted up against when you were heading the e p A

a few years back. Do you think that politicians are paying enough attention to environmental issues generally now in Washington, D C. No, it's kind of sad. I mean the first piece of environmental legislation since the Clean Air Acts were one that we got through in the very beginning of the Bush administration on reducing the pollution from non road diesel engines. Since then, there's only been one other,

and that's been on toxic chemicals. And actually this administration is looking for ways to try to roll back some of those, um, some of those safeguards that were put in. So we're really not paying the kind of attention we need to understand that we can have of good, strong economic growth. We've proved that over and over again, UM, and still have a clean and green environment. Let's come back and to talk further very quickly, her Governor, what

do oil refiners in New Jersey want? Well, what they'd like to do is they want to do some offshore drilling. That's something that they'd like to see. Also, there are a number of the utilities, don't forget, that have nuclear reactors, and they'd like to see nuclear put on the same par as the other green energy sources so they could keep them going. Let me ask you about the role

of business uh in forestalling climate change. When there were whisperings that the President might withdraw from this agreement, we had a statement from from a number of business leaders, a number of executives urging him not to do that. What if we learned about the role, the leadership role that businesses can play, well, they certainly are just that they're playing a leadership role. What kind of impact they're

going to have on the president? I don't know. You have the Secretary of State Rex Tillerson, a former CEO of a major company, going in to say, you've got to stick with this because they believe it, they see it. Many of them, as I mentioned before, have already set aggressive targets. I'm on the board of United Technologies and they've had aggressive targets for a number of years now to reduce their their greenhouse gas emissions and water usage.

It's good business. They're saving money, they're more competitive, they're able to use it as something that stance sets them aside from competitors. It's it's been good for them. And you have a whole number of businesses that are willing and able and are already doing that. So we'll see

what kind of an influence they have. They certainly have an influence on They can have an influence on Congress if they will put their money where their where their efforts are, I mean, where their thoughts are, but they're going to do it anyway, and that's the good news for the environment. You've got businesses, you've got utilities, almost

every utility. While they may still have coal and they may be investing more natural gas, they are also investing in renewables and as I mentioned before, number of them have nuclear reactors that they'd like to keep going, uh in the interim until you can get the renewables to a place where their base power. Um these states, there are state compacts that have come together. They're going to continue to reduce their greenhouse gas emissions and cities as well.

So you know, the horse has really left the stable, it's left the barn, and this is going to happen. What really it troubles me is our position as a world leader and whether who steps into the vacuum. China clearly indicated it will and is looking for that, and Russia is always looking for an opportunity to make inroads. Let me ask you about the the introspection I assume

you've done since the presidential election. In November, Tom was joking about the quantity of modern Republicans New England Republicans whatever you want to want to call them. There are fewer than there were. What are you thinking about when it comes to the future of the Republican Party. This party matter less to you now in light of what we saw in November. Well, party has always been um it's for my basis of where I how I look

at issues of the Republican Party. But it is never superseded policy for me, and I don't believe it should and then hasn't in the past. It now is more and more it has been for the last maybe decade going that way. And that's what we see. I mean, the one thing the president needs to remember, once you're elected, you represent all of the people, not just those who elected you. And frankly, in his case, if you look at the numbers, the raw numbers of people who voted

for him, he's a minority president. We've had these before, but he's clearly a minority president. This is something that's important to his base, and his base is quite small and the whole when you look at the whole thing, they're absolutely dead loyal. This is what they want. But he can't just satisfy his base, and something that has

a huge implications for everyone else, for business, for people's health. Um, he's got a a lot and he's got to continue to learn and be willing to change where he needs to. Christine Todd Whitman, the former governor of New Jersey, you are fifty nine and holding, and we thank you for that as being a good example for those of us timeless.

Greg Ville h. Governor Whitman, writes this morning on those ages and seventy which includes in two thousand twenty Bernie Sanders seventy nine, Senator Warren seventy one, Secretary Clintons seventy three, the President seventy four, and of course Joe Biden, thinking of running supposedly would be seventy eight. How did we get here? What did you call it? David? What was that? Fancy sep? Governor Whitman, And I wouldn't know that. How did we get to be like the Chinese where everybody's

a fossil? Well, the problem is you see so many young people who well that particularly this millennium generation, something that's fascinated me. They really want to make a difference in the world. They really believe in making the world a better place. They want nothing to do with Yeah,

nothing because it's gotten so rough, it's so expensive, so nasty. Um, it's hard to maintain a dignity when you've got the Internet the way it is, people can put off anything they want about you, and by the time you get around to seeing it or to swat it down, it's already gone viral. Um. It's a tough business, and they feel that there are other ways they can make a difference.

The problem is that if you're really going to make a lasting difference, you have to get involved in government and policy, because that's the way you make the final, lasting difference very quickly. Here we've seen a lot of business executives going to the White House to bend the ear of the president. We've seen that happened at the G seven last week, world leaders trying to tell him what they think about about climate change. How about you,

how about others like you who are traditional Republicans. Do you feel like you have a conduit to communicate with this White House through the press? That's the only way, through the press and tweets and that kind of thing. Um. He apparently looks at that a lot, cares about that a lot. But UM, I certainly don't have an on trade of the White House verse Governor, thank you so much, Christine Timman. She will not be at the Rose Garden.

I don't I don't believe. Stephen Colan, he's the director of the Earth Institute at Columbia University and at the Interdisciplinary Center. That's going great to have you with us today. We've talked a lot about what this means for American leadership in the world. Let's talk about the deal in and of itself. So the difference that it stands to make. What could be that that the environmental consequence here if

the US were to withdraw from it. Well, UH, First, the even if the US withdraws from Paris, the Supreme Court has already declared greenhouse gas as a dangerous air pollutant. And even if they withdraw the Clean Power Plan, EP still has to issue a regulation to reduce greenhouse gases. Uh. California and New York have already recommitted to meeting the

Paris targets, probably exceeding them. And UH, I think that there will be reductions in greenhouse gases no matter what happens UH today or whenever with the President, if the if the Paris Accord is about communities and localities. Why

is it so dominantly discussed by a federal official. How did we get to where federal officials are discussing what I'm told as a local accord because the federal from makes foreign policy, though cities don't do that in a global economy where cities in fact and states interact with cities and states all over the world. Uh, it's not quite the same way. It wasn't we when we developed

the constitution. But we still only have one foreign policy in America, and that, you know, I think it is correct when when when you look at the dealing of itself again, I keep returning to that, what does it call for? What's what's the burden? So much as it is want to here on the US. Well there, it's actually there is nothing mandatory in the agreement. It's a set of targets. And what's mandatory is reporting where you are with your greenhouse gases. So there's no actions required.

In fact, as I said, the Clean Air Act, which has which mandates that greenhouse gases be reduced under the Supreme Court decision during the George W. Bush administration, UH, is much more directive than the treaty is and so I think that we're going to see reductions in greenhouse gases irrespective of the paris does it does it change the Is there anything to incentivize a change to the energy makeup in in this in this country? Other way? Do you have these targets? Is that has that fundamentally

changed how we approach energy in the US? Well, I think I think that you're beginning to see the changes in the marketplace anyway. Um, First, coal is uh, you know, it's it's hard to get out of the ground, even with the mountaintop removal it it uh, it's very destructive of the environment. Natural gas, even with fracking, is still has a lower environmental impact. So first stage that we're moving from heavily polluting coal to less polluting natural gas.

But the other thing that's going to happen, and we're seeing this also is renewable energy is going to continue to get less and less expensive as the technology gets better. The source fuel is free, it's the sun. So it's going to act the same way Moore's law did with computing. You're going to see the price going down and down and down. Is already price competitive to a large tree

with fossil fuels. As the infrastructure built up at the technology builds up, UH, fossil fuels will be driven from the market by renewables, and I think we're at the beginning of that right now. 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 Gurra? Before the podcast?

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