Vilifying Wall Street Is a Big Mistake, Mary Jo White Says

and of course, on the Bloomberg. Good Morning. This is Bloomberg Surveillance with Tom Keene and UH. The only one who's missing is David Gura. Today I'm Michael McKee sitting in for David, who is on assignment. He will be back tomorrow those of you who are worried about him. He's just doing some very key interviews out there in TV land and radio land. UH. This morning, we are following the China downgrade. Moody's knocks him down a peg,

no major impact. The Chinese stock market finished up by a tenth Shanghai composite by about tenth of a percent overnight. Futures in the US are mixed at this point, S and P futures unchanged, OW futures down by four points, Nasdaq futures up by five. So no real direction there, and that's going to be a theme here with our first guest. In just a moment I mentioned we are starting the day without real direction. Futures are mixed, and our first guest, Mike Wilson, is the chief US equity

strategist at Morgan Stanley. Uh. You sort of sum that up in your most recent note when you said, well, we're past earning season, we gotta figure out what we're going to trade on next. Um, is there a theme to look for here beyond the general what the heck is going on in Washington? Uh? Thing that we're going on with that that we have all the time. Yeah,

I think the next catalyst is the last catalyst. It's just continuation of the same, which is that the next two quarters were very confident about where earnings are in terms of estimates and the achievability of those. So give an example. Q one in the US we did about we'll do about fiftent year over year growth, and Q two we're only you know, the consensus. Now, I was only looking for about six point eight percent year over your growth. And that's where the backdrop where we're pretty

confident that nominal GDP is going to accelerate sharply. We could see nominal GDP in two Q in the US between five and six percent as things snap back. So that's your proxy for sales growth, which is almost as high as the expected earnings growth. That's just an easy bar to get past. And so once again we're being distracted by the news of Washington or the latest political event,

and you know, the markets are consolidating. Look, we should have sold off much more at some point in the last six or seven weeks given all the events that have transpired, and we did not. To me, that's a very constructive back drop. It's a consolidation. You don't think that the risk or do you think the risk is still out there? When you look at a pe for the SMP of twenty one UM, it's not near the records we saw in the past, but it is significantly

higher than the average. Uh. The the idea that we could see a sell off still out there, well, we have a little different view on that. So last you know, we've talked about earnings, but the other story that's going on is we are getting multiple expansion this year, So we look at a little differently. We think we're training seventeen and a half times right now forward twelve month estimates of about one thirty eight, and those numbers are

likely going up over the next two quarters. Our our thesis has been for a while that equity rist premiums are now finally normalizing, much like other risk assets. And if if we just get to a normal equity risk premium in the US, we should trade nineteen times. And how do we get there. That's two fifty and an equity risk premium which is normal for the last hundred years, plus a two seventy year which is five and a quarter,

and that's nineteen times. So nineteen times, you know, call it a one two number, which we think is very visible. The next sort of six months is something the market should start to think about. So we think there's meaningful upside,

not just a couple percent, but meaningful upside. Mr Keene has joined us from the television set, and to I point out that Mike is looking for to seventy five tenure, where at two eight this morning, there's some distance to go, some distance to go but with kurve flattening that we've seen in the last couple of days as well. We'll do that within our data checks this morning. But as Mike mentioned, it pretty quiet, nice day have you here, Michael, we have to find time within the morning to speak

Denver Broncos football. Why exactly? That's what they would say in Denver Good Morning and syrus Sex Channel one nineteen in Denver, Michael Wilson with us with Morgan selling. Michael, I want to go to the great secrets of Morgan Stanley which are in your file. You are carrying a Finder file that my father used in nineteen fifty eight. This is folks. You have to see this. I'm gonna take a photo of this and put it out on Twitter. What what is in your file? What an equity strategies

carry around with them? I got this from a guy named Clarence Speaks. Does that mean anything to you? It's this is a cheap version of of of a fold. It's lighter, it's paper. I can throw it away and if I if I feeling fancy, I can get a new one. Pretty pretty, pretty pretty good. You know. It's great. So such a it's a massive throwback we're looking at off folks, at this flexible one of those off red

Crownish files. I think Tom Hanks used that in you know, tink Her Tip, whatever the spy movie was he had a couple of years ago. What do you read it, Morgan Stanley? What forms your equity opinion? Yeah? So we we actually, uh, you know, I try to stay current on everything, not just what's going on within the four walls of Morgan Stanley because it's quite frankly, you know, we don't have all the answers. Uh, And you have to be yet to be wary of getting a group think.

So the advantage we have as we're global, we have strategists and economists all over the world. We meet frequently, we talked regularly, we email, but we but I read everything, Tom, I mean you have to stay current. Is you're you're well informed at what's the group think right now? What's

the group think that scares you right now? Well? I think you know, we were early last year on the idea that the you know, global economy had a recession in fifteen and so sixteen was a recovery year, and so we've been uh, we were early on that call

we've gotten more. Uh. I would argue conviction in that call that it's more synchronous in nature now that we're getting not just right GDP growth, we're getting a little bit more inflation, that runaway inflation, and that really has given us confidence that nominal GDP you know, is now at a more sustainably higher level, which is critical in the world has overlevered. And so the risk is is that we have been right, uh, and that we now are you know, we're looking for the self affrica, you know,

affirming data points. Okay, so we got to be very just cognizant that we don't overstay our welcome because markets, you know, eventually will have a tougher time when you when you look at what the group think is, how often do you step back and say they're right? I mean, there's a reason the group is thinking this way. I mean how much weight do you put on trying to be contrary or worry about what other people I think? You know, that's that's a great question, Michael. They Uh,

I've learned. I've spent the last four years I've spent in our wealth management area. Prior to twenty years was in the institutional world, and the biggest advantage of being in that world was not being is easily distracted by the noise. So I've learned to kind of not get such an itchy trigger finger. When you know things are working and your call is right, you have to let

things run a little bit. And quite frankly, I think the reason why a lot of institutional managers have had struggled the last seven or eight years is because they haven't been willing to stay with their investments, that their their thought process. They've been too willing to trade it to to kind of move in and out of things. And quite frankly, there's been some terrific, uh, you know, longer term themes in the last seven or eight years. If you, if you, if you could have captured it

will defend for me the idea of buying hold. I'm sure you saw the Wall Street Journal story this week. This is the quants are taking over, and that's trade in and out as fast as you can. Well, I think, and I think they're in lies the opportunity. So the two advantages that the two I would argue advantages that are still out there right now are sort of liquidity and time, uh and and actually individual investors or wealth

owners had those advantagers. We don't, you know, individuals don't need to perform every day or every month or even every year. And so the idea that buy and hold went out of style in sort of two thousand and two after the you know, tech crisis is classic behavioral economics one O one. Right. Everybody wanted to be buy and holding the nineties when it's exactly when you should have been thinking about, you know, maybe being a bit more tactical as we were going into a secular bear market.

But of course now we're in a secular bowl market, and everybody wants to be a trader. And the reality is that this is a time time to be more of a buy and hold mentality, not not because the world's perfect place, but because the compound returns tax deferred is the best way to be. I'm putting his on on Twitter, and there's a massive global viral support for the pendeflex indexed expanding files lettercraft January to December index twelve pockets each sixteen dollars. It's no it comes in.

It's called Wilson red at Staples, and it was Michael Wilson with and we will continue with a smart discussion on equity uh markets as well. Michael McKee and Tom Keane. Michael McKee and for David Girl, where's David today? Michael, He's just an assignment as he's on assignment. I always have fascinated by that Tiffany news and um, you live right by there. You're not chatting? Yeah, I know, but

I went through. I went through the entire press release, and thank you Tiffany's for writing a press release in English. It's really quite good their earnings report. And I believe I saw no mention of the Trump effect. I was just gonna do. I'm curious because, of course, for those of you who don't live in New York, Trump Tower is literally next door to Tiffany's and you can't get near. Um the place. It's better than it was. It's it's

better than it was. But I don't believe I saw like a single line com sales at Fifth Avenue or or you know, lower etcetera. But but never those is there. And then Google on the other side. Impact, Yeah, a great impact at the Keene household. Michael Wilson with us with Morgan Stanley on the equity markets, how do you advise and not about individual stocks, but you're with with your wealth management people or even institutional and they go, look, I just need to own four stocks Apple, Amazon, and

named two others. You know, this isn't in Graham, Dodd and Coddle, is it? I mean, Amazon is not in Graham, is it? Yeah? I don't think it would qualify as a value stocked the way, But is it a value given the growth that's out there? Well, Like, I'm not gonna comment on Amazon specifically, but I mean I would I would say that the secular growth stocks that have done so well, there's a whole cohort of them. Uh. You know, look, this is the world that we are in.

In a world that's been starred for growth, the market has been up very fast growing companies that can grow organically with or without an economic backdrop that's conducive for growth. And then going back to we were talking about last hour and the dividend pairs, right, So that's the barbell that's been working. Uh. And the reality though, is that the breath in the market has been much better than

people might think. Okay, to go back, Mike on television, we said Verizon a twelve or thirteen times earnings Colgate Palmato the nifty fifty six times earnings, I'm gonna center tendency Amazon at a hundred and sixty times earnings one zero. Wow. Well, uh, it has been a good run for Jeff Bezos and company. Um, but you gotta wonder how your suggestion, Michael, that uh, with nominal growth picking up and still room to run in terms of multiples, Um, we should see more breath

developed that we've had. Yeah, but I want to go back to that because the breath has actually been quite good. It's just that the the you know, the leaders have been extraordinary. Uh. And let let's go back to like the New York Marathon where you've got four guys from verybody, but you still ran a good races. Okay, you know, but you know, and that's what kind of what's going on is that there are a lot of stocks running a good race. There are some stocks that are running

a ridiculous race. Uh. And they have they have goosed the returns. But if you took those stocks out, the returns this year would be quite good for the for the overall market. And and I also go back to the breath of the broader equity market, not just in the US but globally. That that the signal from the global equity market is I think confirmation of this idea that this is a global economic and earnings recovery. It's

not about the four stocks. This is not let's put it that way, whether they're really were only the t MT area that was working and everything else was going down, or two thousand fifteen when it was extraordinarily narrow and there was an outright recession in the old economy. Let's talk about two thousand and sixteen, just real quick, um, this is you know, this is what happens when we

come off the recession. Those stocks that we were just mentioning the fast growers, uh, they underperformed significantly, and the value cyclical areas like financials, industrials, materials really outperformed. We think there's another leg of that probably in the second half of this year, as people get comfortable, particularly fixed income investors, get comfortable that growth is not rolling over, that it's actually maybe even accelerating again in the US.

And then do you see age spots start to develop or is it too hard to know given the uncertainty with what's happening with fiscal policy in the US and monetary policy in Europe. Well, I think the things that we were looking for to tell us that we're getting closed, it's getting more dangerous, right, would be credit spreads is probably a good thing to watch. The YEO curve, as we mentioned earlier, tom is not flat yet. It's still got you know, eighty basis ninety basis points of steepness

to it. And that's okay, that's a decent environment. Go back in time and look at look at the periods when you had about ninety basis points after a big flattening. That was actually a pretty good time down stocks. Michael Wilson, thank you for joining US Today Television Radio. He is chief equity strategist from Morgan Stanley with decades at the firm, taking a more fundamental view of these equity markets. Surely

one of our most valuable guests. Stanley Collendar of Corvis MSL Group on the Budget, on his expertise of what the hill actually does with your tax dollars. Stan Collendar, Michael McKee wants to dive into the budget, but I've got to ask about CBO. I keep refreshing CBO waiting for that scoring which we will se today. Do you have a guestimate of when we'll see the actual healthcare scoring by CBO? My guess is later this afternoon, Tom,

I would stop refreshing for a couple of hours. I don't want to jump in here and sound like an expert, but you but I will know because the CBO actually said they will put it out this afternoon. Blog um, they are going to release it in the afternoon. It says it doesn't say what didn't I didn't. I just say that, Yeah, that's okay, that's why we pay you Can I go? Should I just go home? Why you can? I just want to leave now and let Colin post the show. Stan. What is the scoring actually gonna say?

What are we gonna see? Well, look, I don't I didn't ask, and I don't know precisely what they're gonna say. It's going to be an update of the scoring they did of the previous version, and there are two things to watch. There'll be two numbers that are important. One is the impact on the deficit I'll talk about in the second, and the second is how many people will be thrown off health will lose their health care coverage

because of this. UM. The first number, the deficit number, is important because if it doesn't reduce the deficit by two billion dollars, Uh, then it won't comply with the reconciliation instructions in the House will have to take another vote on this, which it probably can't do and pass. But there's that's not gonna happen, right. I mean the last scoring UM found it would save a hundred and fifty billions, So I mean they got at eight to

play with. UM. Yeah, I look, they're they're they're they're close. Uh, but we don't know what the impact of the changes that the House made in the second version. So this is this is the big, the big thing that everyone's holding their breath on because the House won't be able to repass this the second time. But political number that's going to be more important is the second one, and that's that's the one. How many people are likely to

lose their healthcare coverage because of this change from Obamacare. Uh. If it's if it's around the twenty or twenty four billion men that we had the first time, Uh, it's going to be a real political problem and it's going to make life very very difficult for the Senate and probably makes passage of anything, any kind of healthcare reform this year much more problematic. As long as we're in healthcare, let's stay on that subject for a moment and ask

where the Senate is at this point. I mean, they basically said, forget what the House did, We're going to write our own bill. Um, where are they Basically nowhere? They're there, you know, Mike, after it's been eight years that the Republicans were screaming about Obamacare, but they didn't make any serious effort during that time to come up

with an alternative. They're just dealing with that now. Uh, the Senate has got a gang of anywhere from thirteen to twenty members, which is a fifth of the Senate at any one time, trying to trying to explain to uh Mr McConnell, the Senate majority leader, what they want and what they need in order to in order to

be able to vote for something. So these are just preliminary discussions that my guess would be and it's just a guess that if you see anything had come out of the Senate, it won't be until after Labor Day. Send condor were gonna continue this discussion here with Ah, it's a double I guess it's scathing squared the calendar with a scathing note in Forbes, followed by Laurence Summers, a former Secretary of Treasury, with an equally terse note

in The Washington Post. We'll dive into the actual budget debate of yesterday and actually to move the story forward to where Congress may go again with your tax at dollars. Michael McKee and Tom you know I'm gonna ask a question here of stand calendar and get out of the way, because McKeon knows a lot more about this than I do. Stand cold three growth assumptions. Are you kidding me? Good? Look,

I didn't say it. This is what the administration is saying is it's gonna happen, but they don't say exactly how it's gonna happen. It's more wishful thinking. And it's it's at least a full point Mike, correct me if I'm wrong. It's at least a full point over what the Congressional Budget Offices is likely to happen over the next decade and what the Federal Reserve says it is going to happen over the next decade. Um And and Mick Mulveny onb director yesterday said if he doesn't get

three gross, he can't balance the budget. I guess that means we're going to have a much bigger deficit than anyone any anyone's projecting right now. Uh, let's unpack a little bit of this. Uh. The the interesting thing, you and I are old enough. Uh. We won't say how old we are. But I don't remember a presidential budget being delivered to Capitol Hill that wasn't considered dead on arrival. It's more a political statement about what they want um.

And so I don't quite get the fixation with the balanced budget in the sense that mulveney is not a dumb guy and he has to know that this thing is is a jury rigged um kind of joke in terms of some of the things the accounting gimmicks they use, which a lot of people, including Bloomberg News have written about. So why do they do that? I mean, why, why,

what's the motivation? Why don't they just do a realistic budget? Um? Look, the last realistic budget I can remember was Gerald Ford when he was predicting that the economy was gonna GDP was not going to grow, and he got widely criticized for it for saying, how can you predict it it's not going to grow and not come up with a plan to make it grow. Um. The President promised to balance budget during the campaign. He promised economic growth is three eight four. I think at one point he said

it could even be five. Um. So this is you got to look at this budget. You're right, it's a political statement. You got to look at what the administration yesterday did essentially as a Trump political rally. On paper, it's just a play to the base to say, see, we did what we're doing, what we told you we were going to do. I don't think anybody takes it seriously. I mean, what struck me about it is it's the President appointed a Tea Party congressman as omb director, and

he got a Tea Party document. The real news here is that the people like mc mulvaney and and the Freedom Caucus believe that from it is too big. So the document says, here's what you do about it. You cut funding for everything and you make it go away. Yeah, except that the real news actually there are a couple of pieces of real news, But the real news is they predicted that they put out a Freedom Caucus budget

that was widely and resoundingly and bipartisanly rejected yesterday. You even you even have senior Republicans in the Senate said, not gonna happen. We're not going to pay any attention to it. Let's move on. So, I mean, this was a pretty bad defeat yesterday, a failure for the Freedom Caucus budget. And for those who think that we've just got to get the government down into into miniscule levels and one you one percent growth rates and those types

of things. Look, the second piece of news is that this is the first time in my memory and I will not give my age either, but it's at least forty years since I've been working on the budget, the first time that I can remember the president and not being in the country when his budget was revealed. Usually the president wants to have a press conference and take a victory lap for what what was proposed, and that

didn't happen yesterday. And the third thing is this Treasury secretary was nowhere to be found on on this budget. Usually the Treasury secretary is part of the unveiling of the president's budgets because presumably taxes are a relatively big part of it. So it looks like this administration has has walked away from its own budget almost from the moment it was submitted. Okay, but that goes back to Mike's question, why did they do this budget? If the

administration just walked away from it, I'm baffled. Well, they they did it just to put out of the equivalent of a campaign brochure. They'll point to it all. Has anyone ever done that before? Have you seen that in your what is it? Eighty year history in Washington? Dred and thirty two? But thank you? Um right? I used dynamic scoring for t come up with my age. Um, Look,

every president's budget is at least partly a political statement. Uh, it's it's usually all a part political statement, part accounting document that is part governing document. This one is almost entirely political. I've seen that a lot, particularly two of the final budgets of the first budgets of presidents. Um. But it's unusual to get it's unusually get a political document given to a Congress of your own party that you expect to act on it. What's the why if

we stay it's a political document? Why do it? It's for it's for re election purposes. It's to reassure the base. Um. It has very little to do with actually governing or expecting Congress is going to implement or adopt and implement what the president proposed. This is just the quickly equivalent of a political platform during the campaign. All Right, so you said, Um, we move on to what's next? So

what is next? Does this have a negative effect on the effort to pass a two thousand eighteen budget resolution and therefore get tax reform. Well, the answer is yes, Um, it's it did two things. First of all, it created a big wedge between House Republicans basically the Freedom Caucus Fax and Seni Republicans who have already rejected the Freedom Caucus budget. Um. That's going to make it very difficult for the two sides of the House and Center Republicans

to come up with a budget resolution this year. It was always going to be difficult, but this made it more difficult yesterday, Mike, as you just suggested, if there's no budget resolution, there won't be any tax reform this year because they're going to need a budget resolution to do reconciliation. There's that word again, that would prevent a filibuster from being used on tax reform in the Senate. It also sets up the likelihood of a government shutdown

in October. Okay, Stan Colinder, let's leave it there. Thank you so much again. Runch you by Bank of America, Mary Lynch. With virtual reality, virtually everything will change. Discover opportunities in a transforming world via a mL dot Com slash VR Mary Lynch, Pierce, Fenner and Smith Incorporated. There's

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

you the power of Bloomberg's news and data. Download or io s app or search for the Bloomberg extension at the Chrome Store to try lens out. Learn more at Bloomberg dot com slash lens. A few minutes this morning with Francisco blanche A, Bank of America, Mara lench here on Hyde to Carbon's right. Now, Okay, Vienna, there's vienna, there's Vienna one, Vienna to Vienna eight. How how important

is this vienna versus the last vienna or the next vienna? Well, Tom, I think I think it's actually a lot less important uh than previous meetings, because it's been telegraphed now for for several weeks and uh and and I think the outcome is pretty clear. We're gonna get either a six or a nine month extension of the deal, which in my mind is is uh the market the the market upo markets expection. So so not change there. Your range bound downside risks gloom and doom are strong dollars, shell

technology and another price war. Let's go to the drama. Are we gonna have a price for I don't think Open can afford the price war, Tom, I think if Ope goes for another price war, uh, their budgetary position, whether it's Suthy or others, is gonna be is gonna be severely impaired. So I don't think they can really

afford it. Um. And equally, I don't think they can really afford another big cut because uh, it will force them to a permanent markets shared lass, which will also impair them um fiscally over over a three to five year windows. So their best course of action is to stay where they are. We got West Texas this morning, Brent. So, has this deal sort of created a balance in the oil markets just enough to bring enough fracking in to keep prices stable, but not enough to bring enough to

bring enough production in. The prices are going to fall again? Well, I think that's that's kind of apex uh target if you like UM and I think I think what we are likely to see is uh spot prices continue to rise, and we think maybe we'll be close to sixty barrel by the summer for Brent. So we look at another five six dollar uplifting prices, but we think that the longer day, the prices prices for oil in twenty nine, uh and even December eighteen will keep moving lower as

more hedging activity comes into a market. It uh So, yeah, we're moving into a more fun equilibrium, I would say, And and part of it is really uh this whole inventory normalization process to create a buffer between supply and demand right, I mean, which which we haven't had for for the last year. Thank you for coming in. Thank you. We got leave it. There's just too short. Can you come back for a longer time? Seven blocks to three hours?

Bank Bank of American Merrill enjoys interesting in particularly with a move over from Hydercarbon's into the other UH other parts of commodities as well. The lady from William and Mary, Mary Joe White, with an esteemed career in law, was selected to take over UH the herding of cats at the Securities and Exchange Commission. She did that for call it four years. She's the thirty first chair of the

Securities and Exchange Commission. Attorney why joins us Chairman. Wonderful to speak to you UH this morning when you were making light talk about the SEC. Now, what is your biggest worry? The first great to be with you. I mean, I think the biggest worry from the well for the SEC's perspective of getting its job done is what happens

to it in the way of resources. I mean, you know clearly an issue that you know, one you know it must continue to worry about is to make sure that the systems that underlie our electronic markets, uh, you know, really work seamlessly. So I spent a lot of time doing that, uh, making some changes, making some enhancement when I was a chair. One of the issues, and we've seen it within our Bloomberg reporting is the budget. I guess CBO is going to come out with healthcare analysis

today and the President dropped a budget. I saw one Democrats sunder who took a photo for Twitter of the new budget in the waste basket. How is the budget of your SEC? Did you leave the SEC with a

depleted organization? Well, the SEC, I think was comparatively treated quite well by the Congress, the appropriators, but you know, like I think most of the financial regulators uh that aren't self funded, unlike the FED and the banking regulators which are self funded, really significantly under resource for the really very vast array of responsibilities that Congress has given the SEC. So you know, we were in comparatively good

shape when I left, but still significantly under resourced. When I look at what you do, so many people look at the SEC is the police officer of bad people within the financial system of the United States, And the considered opinion is if the bad people are bad they're gonna be bad, They're gonna do bad things, and there's nothing Mary Joe White or Arthur Levitt or anybody else is going to do about it. What did you learn

about going after bad people running the SEC? Well, of course I should have been in that business before his U S attorney as well, and I had the you know, the criminal powers. I mean, look, I mean the SEC is you know, Wall Street's main cop, uh, and it needs to be a very strong cop. That doesn't mean you're gonna catch you know, every bad guy, but basically the fairness of whet of the most reliable, you know,

strongest markets in the world. Uh, that goes away if you're not sufficiently policing and going after the bad guys.

And so one of the things that the SEC has to be sure it's doing is sort of covering the range of market participants and not only going after punishing the wrong door that you're looking at at the moment, but trying to send a deterrent message more broadly to the marketplace, so you know that others will pause and not do the wrong thing when they see you know, how hard the SEC or the Department of Justice in some cases comes comes down on them if you're just

joining us SOS Mary Joe White with as the former chairman and recent chairman of Securities and Exchange UH Commission A chairman. When when I when I look at the SEC today and when I look at the budgets and the Trump administration, can you find a distinction between a Trump SEC and previous sec s? I don't want to get into you know the class that you are, and you're not gonna say bad things about good people under public service now. But is there a new SEC it's

different than what you've seen before. Well, again, I do worry about the budget impacting the agency's ability to do its job compared to how we were able to do the job you know when I was there. Uh. In other words, better resource, still not enough. You know. I think very highly of Jake Clayton, my successor, who just took office a couple of weeks ago. Uh So I have a lot of confidence in him, a lot of confidence in the SEC. Professional. Can you push you? Can

you push back against Pennsylvania Avenue? Absolutely? I mean the SEC is an independent agency now. Sometimes it's easier said than done, but it means that you know, you do not take direction from Pennsylvania Avenue or anybody else. Basically, I mean, you're you obviously, you know you have a different priorities depending on particularly the Chairman's point of view,

and that's perfectly appropriate. But no, I think j will be a very independent SEC chair and I think he's very focused on, you know, improving our our markets and in particular our public markets. You know, something we've talked to Chairman love It about too many times is the basic tone of regulation in this strange word deregulation. Which way should the SEC turn? I think it has to be smart regulation. I mean, I think not deregulation connotes

too much, you know, kind of the wild West. You do not want that in the markets expected for investors. We know Arthur Lovett doesn't want that. No one ought to want it, uh in order to maintain the strength of our capital markets. But you do need to not overregulate. You need to try as hard as you can not to make their regulations so complex that they really either can't be complied with or that's all that issuers are really you know, really doing, as opposed to focusing on

you know, growing their business and so forth. So it's a balance. But I think I think the regulation is I picked that over deregulation, as those terms are understood. There has been criticism, and of course we always turn to the senator from the Commonwealth of Massachusetts who really went after you at times, of course, be Elizabeth Warren. How did you handle the criticisms of an anti Wall Street or doubting Wall Street left? Where do they fit into the dialogue of the future of Wall Street and

Main Street America? Like you? You basically, I mean criticism comes with the territory and the sec in particular, not only overseas Wall Street, but with a lot of politically charged you know, issues, uh, as well, and so you expect the criticism. You listen to it. I think you want to be very constructive no matter where it's coming from. Listen to it, see if you can learn something from it, do something differently or not, as the case may be. I don't think it's healthy, uh, to have in effect

a class warfare against Wall Street. I mean, you look at the activities, you look at the regulation, and you regulate strongly, and you go after anybody that commits wrongdoing, whether on Wall Street or Main Street or wherever. But you know to to to vilify Wall Street. I think it's a big mistake within that is our nostalgic memory. One final question, if I could marry Joe White, and that is the idea of glass Stiegel. I find almost comical how small glass Stiegel was as part of thirty

three and thirty four legislation. I believe folks it was four pages. That may be off a few. Let's bring back glass Stiegel. What's the Mary Joe White reality? I think it means very different things to very different people. Thank you, that would be the right answer. Well, what are we going to see? I mean, I mean it

doesn't go away. I mean, you know, Glass Steagle, as some have in mind for it would basically, you know, have banks be the kind of the old fashioned uh you know, outdated mode and as I would see that, you know, basically handling deposits. That's a very important function obviously uh highly regulated to to keep them in their lanes.

Others would see really a separation of functions where you let the non depository part of the function, um, you know, have a fair amount of a free reign, you know, to to basically you know, grow their business and invest in ways they can't do now. So it's not a panacea, you know, I think we're beyond you know, that kind of simplistic decision, Uh, legislation. I don't think it would

be a simplistic piece of legislation happened. One final question, are you enjoying private practice or is it back to the torture or of law. I love private I love public service as well. But I'm I'm back at the device at Plimpton for the sixth time in my career, practicing law flat out and enjoying it a great deal. Her billibile hour, Folks, is like a single pitch from a Yankee starter. I believe he would say, Mary Joe,

I thank you so much, greatly, greatly appreciated. She's a former chairwoman of the Securities and Exchanged Commission, thirty first chair of the Securities in Exchange a commission. She is uh, absolutely original. President Trump put out his two thousand eighteen

proposed budget yesterday. Here's some of the things that they proposed, cutting uh twelve point four billion dollars from health and human services, National Institutes of Health, five point seven billion dollar cut, including a billion cut from the National Cancer Institute, one point three billion cut for the Centers for Disease Control and Prevention, Food and Drug Administration would lose eight hundred and fifty four million dollars over ten years. Representative

Tom Cole is a Republican from Oklahoma. He is a member of the House Budget Committee, and he has been a defender of in A H and other health programs in the budget process in the US Congress. He joins US now Representative Coal. This has to be a disappointment to you, I know, even though you'd like to support a Republican budget, a disappointment to you in terms of the meat acts they want to take to spending on healthcare, particularly prevention and disease research, Well, it's a it's a

mixed bag, to be fair. I mean, this is the first presidential budget we've seen in eight years that actually comes into balance. So I like that, and as a defense fawk, honestly, I favor what the President is trying to do there. In terms of the nih however, I think honestly they're making a mistake. UH National Institute of Health Center for Disease Control are critical and defending the country every bit as much as the Pentagon is. Quite frankly, you're much more likely to die in a pandemic than

a terrorist attack. So having a biomedical research infrastructure that not only protects Americans, but over time also brings down the cost of healthcare. I mean, this country spends, for instance, about two hundred and fifty nine billion dollars a year looking after patients with Alzheimer's and dementia, and uh, you know it's gonna move up as people continue to live longer and longer periods of time, and you've got to

do something to mitigate that cost. And the best Alzheimer's research and the world's going on at the National Institute of Health. So again, I think you don't want to be penny wise and pound foolish. And when it comes to investment at the National Institute of Health and Center for Disease Control, those are critical investments. Good morning, call excuse me here, I was just researching someone. You know, will I believe Frank Keating's name is being tossed around

to run a beleaguered federal Bureau of Investigation. You work for Governor Keating, his secretary of State in Oklahoma. How wise would President Trump me and choosing Frank Keating to be the next Director of the FBI extraordinarily wise, Frank Keating is an exceptional public servant. He's a former FBI agent himself. He was a special he was a U S attorney. He was also the number three person Associate Attorney General in the Reagan Justice Department. So his experience

of law enforcement background is really quite remarkable. He's a person of unquestionable integrity. What was it like? What was it like working for him day today? We know Frank Keating will that's job of my life? Tell you truth? Come on, come on now now, I'm I don't care you. I mean, you know I used to tell him. I actually saw him last week. We stay in very close contact.

But for six years, I talk to him every day, and except for the two weeks around the Oklahoma City bombing, I laughed every time I talk to He's witty, he's quick, he's funny. Uh he's in private what he seems to be in public. Uh. You know, I just had wonderful, wonderful relationship with him and tremendous confidence in him. And he really dramatically moved the state forward. And he showed during the Oklahoma City bombing how he could perform on

a national stage. I mean he is unbelievable. Uh, and Frankly, he's married to somebody equally unbelievable. And Cathy Keating, who was a remarkable figure in her own right. Uh. There is a headline crossing right now that the Trump administration, according to c an n, hitting the reset button in the search for an FBI director because they were looking No, I think they were looking at Joe Lieberman and a lot of blowback from uh members of the Senate, a

Democratic party against him. And so maybe frank Keating's will come up. Uh. We can talk about that forever. But since we only have a few more minutes with you, let me quickly ask you about what we're expecting from the CBO this afternoon. I don't think you'll have to revote.

I would be surprised. I think deficit reduction. But if if you see an increase in the number of people uninsured, how big a weight is that going to be around Republicans next when they run for re election next Well, it depends on Frankly, why they're I mean, if you are not in the insurance market because you choose not to be. And that was sort of lost in the discussion over the last CBO. What they're basically saying, if you remove the mandate, a lot of people won't buy

this stuff. Well, you know that should tell you something right there. I mean they've even had people on Medicaid getting out of Medicaid, which cost you essentially nothing. So, uh, you know, I think it ought to be part of the discussion, but it shouldn't be decisive. And it's again, CBO numbers are It's a quirky system they have and they're not always reliable. As a matter of fact that they quite often aren't. But you know, they're the best

we can do. But I would never take them as stuff Congress when we need to continue this discussion, we would hope to do it, and she did with Michael McKee, David Gura, myself, Tom cole is from Oklahoma. Thank you particularly for those comments on the former governor Frank Keating as well. 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 Runch You by Bank of America Mary Lynch. With virtual reality, virtually everything will change. Discover opportunities in a transforming world. B of A, m L dot Com slash v R, Mary Lynch, Pierce, Fenner and Smith, Incorporated,