Donald Trump and His Legal Woes
Host: Peter Haynes, Managing Director and Head of Index and Market Structure Research, TD Securities
Guest: Frank McKenna, Deputy Chair, TD Securities
In Episode 34, Frank breaks down the legal woes of Donald Trump and is left to wonder "is it possible to be President of the United States while in jail?" Of all the cases in front of Trump, Frank believes the innocuous situation of the Mar-a-logo documents may possibly be Trump's biggest legal risk. Frank discusses the implications of a split Congress, indicating that the topic is top of mind with investors and corporate clients post mid-term elections. He is closely watching the Georgia run-off for the 100th Senate seat as a Democratic victory would reduce the influence of Joe Manchin and other senators at the end of the spectrum, allowing the Democrats greater control of Senate Committees. Turning to Canadian politics, Frank contrasts his view against his colleague, The Honorable Rona Ambrose, who believes that the new Premier of Alberta, Danielle Smith will win at the next provincial election.
FRANK MCKENNA: In 2024, Democrats are particularly vulnerable. 23 senators in play and the Republicans only have 10.
PETER HAYNES: Welcome to episode 34 of our monthly TD Securities podcast on Geopolitics with our guest the honorable Frank McKenna. My name is Peter Haynes, and I'll be your host for today's episode, which we're titling, Donald Trump and His Legal Woes. We could probably have that conversation every month, but just before we get started, I want to remind listeners this is a TD Securities podcast, and it is for informational purposes. The views described in today's podcast are of the individuals, Frank and myself, and they may or may not represent the views of TD Bank or its subsidiaries, and, of course, these views should not be relied upon as investment, tax, or other advice. Quite frankly, Frank, I wouldn't want anyone ever relying on me for investment advice, that's for sure, given my personal track record. But again, I know you've been on the move a lot lately, and I want to get a sense of some of the conversations that you've been having with investors you're speaking to, politicians that you're in regular dialogue. And, of course, given your position as Chair of Brookfield and then on the board of CNQ and some other publicly traded companies, I'm sure your lens into what people are thinking right now in the corporate world is pretty broad. So what is the topic that generates the most debate and discussion from your meetings of late?
FRANK MCKENNA: Well, I think number one by a wide margin would be the midterm elections in the United States. These really are very consequential. And it could affect everything from the prosecution of the war effort in Ukraine, which some Republicans have more or less vowed to block, at least, the role of the United States in that, gets into tax and spend policy, and health care, all kinds of issues, the prosecution of Trump and/or the prosecution of Biden as the case might be. But those midterm elections were extraordinarily consequential. I think it's fair to say a total shock to just about everybody. Some people would like to pretend they could predict what was going to happen. I'm not in that camp. If we look historically, we will see that going back almost 100 years there is a very, very strong correlation between the party in power, having the president, and the results of that election, a strong negative correlation. And this defied almost 70 or 80 years of history. The fact that the expectation level was so high for a red wave and the results were so tepid. Just to give you a graphic example, when a president has an approval rating under 50 points, and Biden's was well under that, on average, that party tends to lose about 43 seats in the midterms. In this case in the house, it's more like somewhere between six and eight. In the case of the governorships the Democrats actually picked up two, and in the case of the Senate they've picked up one. And these are-- they sound like small numbers, but they're pretty massive shifts. I would say the midterms were a big surprise to everybody. The markets generally seem to have liked the fact that we'll have an element of gridlock, and that nothing too negative will be enacted. And I would say that overall, Americans have registered a vote for sanity and moderation. If you read through the entrails here, you will see that extreme candidates almost invariably lost on the right and on the left. In fact, I had breakfast this week with Bill Clinton and Hillary Clinton here in Toronto, and they remarked at how so-called progressive candidates also fared badly in this election. And it just tells me that the public are tired of the cacophony. They're tired of chaos. They really want more common moderation, and that's what they got. On Roe v Wade, they didn't end up making a binary choice on that, they ended up making a choice for moderation. In the case of the Trump candidates who invariably supported him in denying the election of Joe Biden, they were almost entirely defeated as people are just tired of relitigating old wars, tired of the noise, tired of the chaos, and it was really a vote for moderation.
PETER HAYNES: Well, you're giving me a bunch of different directions to take the conversation. I'm going to start with Trump given that that's the title of this particular episode, and the last month has, any way you slice it, been just a disaster for Donald J. Trump, former President Donald J. Trump. You mentioned that a majority of the candidates that he endorsed at midterms lost, and that led to arguably a disastrous result for the Republicans. But more specific to Trump, the walls around his legal battles seem to be closing in with the appointment of a special prosecutor to separate the government from the various Department of Justice investigations. Meanwhile, Trump himself announced his candidacy for the Republican leadership for 2024 shortly after the midterms, and, of course, before the runoff in Georgia. Regardless, I want to know what your thought is with respect to how this story ends. Does Trump win the Republican nomination, or does he end up in jail?
FRANK MCKENNA: Just the fact that you're asking that question reveals a certain view on the state of politics in the United States. The answer actually is that he could end up doing both. Let's start with the Republican nomination. Even though his stock has sunk and it's sunk considerably, a lot of big money people like Schwarzman and [INAUDIBLE], and so on have pulled away from him and said, no, they're not financing. Some prominent publications like the New York Post, Wall Street Journal, have pulled away from him strongly. I think it's fair to say some of the evangelical movement is pulling away from him. In spite of that, he still leads in almost every poll in terms of support within the Republican Party. People that I respect a lot who have looked at this say that in a crowded field, he would win. If the field becomes uncluttered and it gets down to less than four candidates or even one on one, he would probably lose against DeSantis or it may be somebody else by then, but in a crowded field with eight or nine or 10 candidates, he would win. He has a real stranglehold on the base, especially the energized base of the Republican Party. And the more that he's prosecuted, the more he plays the martyr card and quite candidly, more vigorous the support is for him. So with the independents and Democrats for sure and some Republicans, he would be the kiss of death for the party. And in fact, the Clintons told me fairly openly that Democrats, for the sake of their party, probably prefer to face off against Donald Trump, but on the other hand, for the good of the country, they would obviously prefer a different choice. On the legal difficulties, he's got a lot of them but he can handle a lot too. He's a litigious person. He's the greatest single asset the law industry has. He keeps hundreds of lawyers busy on both sides. He's facing some pretty serious peril, and the Supreme Court of the United States seems to not be giving him cover anymore. Just going through a few of them, his tax returns are finally going to be released. The Supreme Court's refused to intervene on that, this is after about a six-year struggle to get his returns, they'll be made available to Congress. Most people looking at that think the biggest thing that he worries about there is not that it will make him look too rich, it'll make them look too poor. He just isn't going to be able to have an ego that stands that kind of scrutiny, we'll see. He's got a case going on against this corporations in New York, essentially, it's a tax evasion case. They were using means of compensating executives that were illegal and another case involving the misstating of values, that's all going on. That probably doesn't put him in as much peril as it does the companies that he's associated with, puts them in peril. Then he's got a case in Georgia regarding an effort to try to convince the Secretary of State, I believe it is, to fraudulently changed the count there. He's accused of pushing his weight around there to try to get a different result. And then he's accused, of course, around the January 6 events, and those charges, which I think are difficult to sustain are getting very close to sedition and treason with the effort that was made there. But leave all of those aside, and there's another one by the way, a writer who's continuing with a sexual assault case against him. But the one I think that he may be most vulnerable on is the document case at Mar-a-Lago. And that set the fact situation when he left the White House he took dozens of boxes of classified material to Mar-a-Lago that seems to include everything from the biggest secrets the United States has on nuclear matters to salacious details of the love life of Macron and so on. So kind of a mixed bag or a mixed box. For some reason unbeknownst to just about everybody, he insisted on keeping all of those classified documents even though there were repeated demands made to send them back and it would appear that he instructed a valet to actually move the boxes knowing that federal authorities were going to be raiding Mar-a-Lago. So on that one, it's hard to see what his defense is. He either has the documents or he doesn't. Clearly, he had the documents and did not give them back as requested, and I think clearly the documents were in many cases classified material. So he can have something he can puff on that, argue that he had classified them in some mysterious way, either through mental conjuring up of classification or in some other way. But I think he's quite vulnerable on that, which is ironic with all of the other major prosecutions being brought against him, civil and criminal. It's a bit like Al Capone who may have killed 50 people or maybe ordered the execution of a lot more, but he ended up getting brought down on an income tax charge. A lot of us would hark back to the days of Conrad Black who was prosecuted on numerous counts in relation to Hollinger and ended up being convicted with a film that we all saw of moving boxes. I think Trump is vulnerable on a number of fronts, but he may end up being most vulnerable on probably one of the more insignificant of the cases against him.
PETER HAYNES: To be clear Frank, which of those cases would disqualify him from running for the Republican leadership if any, and which of those cases would prevent him from being president if he happened to win the Republican nomination and then win the election?
FRANK MCKENNA: Peter, I don't know the answer to that. I'm not sure that any of them would disqualify him from obtaining the Republican nomination.
PETER HAYNES: Can you be president from jail?
FRANK MCKENNA: I don't know the answer to that. I think it would weigh on voters, but is it legally impossible? I don't know the answer to that. I should know it, and I don't know it. But there's no doubt that he has announced his candidacy for two reasons. One was to try to blow off the field. Basically to say, look, the big dog is running, and the rest of you clear out, the number one. And number two, to try to get ahead of charges so that if he is charged, if the independent prosecutor charges him and so on, he will be able to claim that this is just an attack on me because they feel I'm a political threat, and I'm a martyr, and you should get behind me because it's me against the big bad world. He plays that card beautifully, better than anybody I've ever seen, and I think that getting out early is an effort to get ahead of these prosecutions.
PETER HAYNES: How important is this appointment of the special prosecutor? Is that just more of a surface issue, or do you truly think it gives the Department of Justice cover given that they're linked to the Democratic party?
FRANK MCKENNA: I think politically, it doesn't give much cover at all. And by politically I mean with Republicans or maybe even independent voters, I don't think they will view that as a particularly important development. I think for people like me or lawyers or people who are professionals or thoughtful people will like the idea that there's a separation of this prosecution from an attorney general who's appointed by a president. I think that people who care about these issues of process will believe that this is the right thing to do. Like, appointing a special committee of a board in certain situations, et cetera, they will believe that this is legally the right thing to do and it does provide a veil protecting this prosecution from being political. So I think for purists, it matters a lot. I think for political-- for voters, hardcore Republicans in particular, it doesn't matter very much at all.
PETER HAYNES: So I guess to end this little segment on Donald J. Trump, we'll have to end it with the news about Kanye West or Ye, who announced his bid for the Republican leadership yesterday. And apparently in an article, I think, or a note on Twitter, he said that Trump called him and was furious, and then Trump ultimately asked Kanye to be his running mate. So if you're paying any attention to the troubles of Kanye, I would encourage everybody to read the Rolling Stone expose which went through the way he treated his coworkers on his line of clothing and fragrances or whatever else it was in Adidas. By the way, Frank, you're the chair of a board, you want to talk about governance issues that are being accused in this particular case of the really strong celebrity and everybody turns the other way, from internal issues, it is absolutely disgusting if in fact what's in the Rolling Stone article is true. But regardless, Trump is certainly a gift to the media as well.
FRANK MCKENNA: Yeah. On Kanye West by the way, I'm of the view that the press at large and other pundits have some obligation to just close down that whole story. He's clearly a very disturbed individual, and why they would give him ink is beyond me, and encourage him is beyond me, and people very close to him have said this, what he needs is help.
PETER HAYNES: That's absolutely true. And you're right, enough of giving attention to this, it's a distraction. I do have a question for you, by the way, because you've indicated in the past that you have a close relationship with the Clintons, obviously, if you had lunch with them earlier this week, and it's timely. So my question for you Frank, if you wouldn't mind the next time you speak to President Clinton, I would like to know what really went on in 2010 when he was part of the bid team for the 2022 World Cup, which is currently being played in Qatar. The FIFA Uncovered story which is now on Netflix will show the bid for the 2018 and 2022 World Cups were done together. It was expected that 2018 would go to the UK, and they had David Beckham and Prince William and others in their party. And the Americans were there thinking they were going to win in 2022 and their lead person with them was President Clinton. And just to see the pictures of them there, and then to see it go to Russia and Qatar was just-- it's absolutely mind-numbing to think about that. It's timely so I would love someday to hear the inside story on what really went on behind the scenes and why this World Cup is currently being played in Qatar. But it's some story for-- I don't know, have seen that documentary?
FRANK MCKENNA: No. But I'm aware of those controversies. Now, I'll ask him about that, and I'll also ask him about aliens. My children constantly want me to find out whether there are really aliens or not, so I put the two of them in somewhat the same category.
PETER HAYNES: I think you're right. OK. So I'm going to dig in on midterms. I've got a couple of tactical questions for you on midterms. So a split Congress here now that we know that the Republicans are going to win the House and the Senate is going to go to the-- or stay with the Democrats. There was a lot of talk during the run up to the election that Republicans needed a big victory in the House. And that was in order to be able to avoid having to kowtow to the extreme right Marjorie Taylor Greene-types, and there might be, I don't know, 10 or a dozen of those types within the Republican House, can you explain why that's important, and also can you explain the practical terms of a split Congress now that we have the House with the Republicans and the Senate with the Democrats?
FRANK MCKENNA: Well, to start with, I'd say that Kevin McCarthy, who will be the speaker undoubtedly of the House, he's got his hands full because 218 is the magic number to have a majority there. And they'll come in around 222, maybe one below that, maybe one above it, but around to 222. Which means you have to keep almost your entire conference together in every single vote, and even getting all those people in the room. If somebody becomes sick, or somebody dies, or misses a meeting, or snowed in, it gives you problems. And then on top of that, he's got an ideological fraction-- faction or fraction, I guess both, within his caucus and conference that are hard to manage. And that's the hard-right Freedom Caucus. They're going to push hard on just about every single issue, and if they're successful, they will imperil the districts of the more reasonable or moderate congressional Republicans. So there's going to be a yin and a yang on every file that takes place there. So it'll be hard to manage that and hard to get votes where you have 100% support because you can be pretty sure the Democrats are going to rally their, let's say, 214 or 15 votes almost unanimously, so it'll be tough. That's the Congress. What the Congress will mainly do is raise hell. They can appoint committees, they'll investigate Hunter Biden. They'll investigate Biden, maybe try to impeach him. They'll go down a lot of rabbit holes. That's what tends to happen in Congress. And they may try to get some things passed, but ultimately, issues are disposed of in the Senate. And the Senate becomes really important because the Senate are responsible for treaties, for example, ratifying treaties, and for making appointments. And those appointments are all the way from cabinet level appointments right through to Supreme Court appointments at various levels, the courts at various levels. And it's the courts at various levels that have been the best friend for the Republicans for some period of time now. So I think Democrats are waking from their slumber and starting to realize this is a really important exercise. And they'll be able to do that. They don't need the house to do that. A majority in the Senate can do that. So I think you'll see the Democrats very, very active on that front. Will a lot get done between the president and Congress? I wouldn't rule it out. Bill Clinton and Newt Gingrich actually worked together for the most productive period in US history. They ended up doing some important legislative work, they balanced the budgets, paid some-- down on the debt, had a lot of growth. But I don't see those ingredients here. This is a much more ideologically divided Congress, and it's hard to see where there's much scope for cooperation quite frankly.
PETER HAYNES: So what is the art of the possible in terms of cooperation, totally insignificant?
FRANK MCKENNA: Well, some things they will cooperate on. They will huff and puff and blow some of the House down on the debt ceiling, but ultimately they will have to raise it, but not before a lot of damage may take place. On foreign threats, politics tends to end at the shoreline, but not always. But I think that there will be enough Republican support to continue to support Ukraine very strongly and probably will have a united face when it comes to dealing with China and some issues like that. I wouldn't look for a lot of proactive public policy measures, such as gun control, or dealing with an opioid crisis, or things like that to take place during this Congress.
PETER HAYNES: OK. Finally, before we switch to Canada, how important will it be for Reverend Warnock, who holds a four-point lead in the runoff in Georgia over Herschel Walker, how important is a win in that last seat to give the Democrats 51, 49 in the Senate? And that would take away some of the power of the Joe Manchins of the world, is that important from your perspective in the Senate?
FRANK MCKENNA: It's really, really important, and I'm glad you asked me because it's a good chance to talk a little about the US system. To start with, there are polls that show Warnock is ahead by as much as four, but the majority of the polling shows they're virtually dead even with Walker in the lead in some of the polls, so it is really a close call in Georgia. And this is in spite of the fact that just in the last week, Herschel Walker it turns out is actually receiving a tax credit for being a resident of Texas at the same time that he's running in Georgia, at the same time that he's a candidate who's running on a morality platform. And it turns out that he's got four, I believe, illegitimate children. None of which he admitted to, and he's running against a virulently anti-abortion platform, and it turns out he's paid for taking women to at least two different abortion clinics, so it's really something to see. And then this week, and maybe it was prophetic that he said it, but standing there with Lindsey Graham and Ted Cruz, he was giving a speech, and he talked about how this erection is about the people of Georgia. So it's something to watch, but having said that, it's going to be close. Does it matter? It matters hugely for a couple of reasons. One, even though the Senate now is in the hands of the Democrats, unless they win this seat, it'll be 50/50 and the tying vote goes to the vice president. But on committees, they have to share the power with Republicans. The speaker doesn't get to vote. If they could end up winning this one Senate seat, they will have the majority on committees, and it will really expedite their work of getting nominations brought through and legislation brought through. So for that reason it becomes extremely important. It also becomes extremely important because it gives them a certain margin. They've got one Senator, Feinstein, who's 89 years old, Sanders who's 81, Patrick Leahy, 82, if anything were to happen to them, they'd be back into Republican control, so it gives them a bit of a margin of error. And then it gives them a huge leg-up on the 2024 elections which we have to start thinking about already. Because in 2024, the Democrats are particularly vulnerable. 23 senators at risk-- not at risk, but in play, and the Republicans only have 10. So that means the Democrats are much more vulnerable, and they've got very vulnerable seats like Ohio, West Virginia, and Montana. And if Warnock were to win, he's got a six-year term, so you wouldn't have to worry about that particular Senate seat. So it gives them a little bit of a cushion going forward, and for that reason it becomes extremely important who wins this election.
PETER HAYNES: December 6, so not too long, we'll be able to chat on that one at our next conversation. So I'm going to switch over to Canada and regular listeners of this pod series will know that we dropped an episode recently that was an interview with our TD Securities colleague and former leader of the Conservative Party, the Honorable Rona Ambrose. In the discussion with Rona, which occurred at a recent conference we hosted, there was a lot of ground covered particularly on Canadian politics, and I've got a couple of takeaways, particularly on the province of Alberta, which is her home front that I would like to get your take on. So here they are, Frank. First of all, we'll start with Danielle Smith. She will win the premiership next May if the Conservative Party is united, but that's a bit questionable given that Smith only won 53% of the party votes when they elected her as their leader. If Danielle Smith does in fact win, then she will follow through with a movement for the province to leave the CPP, and she'll also push for an Alberta Sovereignty Act, and she'll fight against any federal policy that harms Alberta, but more recently have admitted they will respect the Supreme Court rulings. But certainly in advance of a ruling, they're going to fight hard on any of these federal policies that they think are encroaching on the sovereignty of Alberta. What are your thoughts with respect to those two points?
FRANK MCKENNA: To start with, I think she could end up winning the premiership, but it's not foreordained. I've talked to a couple of former premiers who are very knowledgeable on this very issue, and they would agree with me it depends a lot on how she can explain her positions and perhaps temper them a bit. Rachel Notley of the NDP is very popular, but the NDP aren't particularly popular. Alberta is a conservative province, so the trend line would suggest that a conservative, in this case Danielle Smith, leader of her party would end up winning. But right now I'd say the people of Alberta are not entirely drinking the Kool-Aid, and it depends. During the campaign, she was talking about introducing a sovereignty act that would directly repudiate anything that Ottawa wanted to do. Since then, she's tempered that by saying she would respect Supreme Court rulings, which is a major concession I would admit, but she's musing about getting rid of the RCMP, popular in Alberta, by the way. They are fighting to leave the CPP. Well, they have to be a little careful. Their provincial fund just several years ago made a pretty bad hiccup and lost a couple of billion dollars, so people are mindful of that and aren't 100% sure that they want to take CPP money and grab that provincially. So these are all controversial measures, and she'll have to fight and explain them. And she's a wonderful communicator. I know her, and I find her a very amicable person, but she's going to have to explain all of these. And then this week in an effort, I think, to appeal to her base, she passed a law outlining the use of masks in the school system. I think there might be some parents under some circumstances who would say, we don't agree with that. During a period of relative calm on the pandemic, flu, measles front and everything else, parents might say, that's fine. But there may be other occasions where they'd say, well, look, you shouldn't take that tool out of the toolkit, that should be left at local schools to manage. So she's got a lot of fronts opened up, and we'll just have to see. People, I think, sometimes have a mistaken view of Alberta. The cities of Alberta are extraordinarily cosmopolitan. They have many immigrants in these cities. Many people from other parts of Canada have moved there. They have some very so-called liberal progressive politicians who are successful there. And there are some differences of opinion ideologically between the rural areas and the cities, but I think Albertans are pretty passionate and patriotic Canadians too. And at the end of the day, she's got to try to see if she can prosecute Alberta's best interest without attacking the love that Albertans have for Canada.
PETER HAYNES: Well, Frank, your signature if I remember correctly is, in fact, on the CPP given your time as premier in New Brunswick was when that was originally passed and, you know as well as anyone, it is extremely complicated to leave the CPP. It's not as simple as saying, let us take our money and run. It is complicated in how it works, the length of time, the lead time, et cetera, it's not that simple. And all I said to Rona during our discussion was make sure everybody understands the process out there because it's not that simple. They can give them back cash, they don't have to give them investments too, so it's a long period. One topic that you could argue would fit into this encroachment is the topic of any sort of windfall tax. Now, a lot of countries have introduced windfall taxes against oil and gas companies, including the UK and others. Biden has threatened a windfall tax, and you've been on record previously as saying you did not think that that was going to happen in Canada. However, it could be argued that the recent decision to tax buybacks, which would impact companies that have huge cash, such as the oil and gas companies in Alberta, the 2% tax on buybacks, which has been put in place in Canada mirroring the rule in the United States would, in fact, arguably be a source of encroachment on sovereignty in the province of Alberta. Do you still stick by your stance that you do not think there will be a windfall tax on oil and gas companies, and do you think that this minor tax on buybacks is significant enough to cause ire in the province of Alberta?
FRANK MCKENNA: Well, to start with, yes, I'm sticking with my position. Obviously, I could easily be proved wrong and especially with the NDP influence in the coalition with Trudeau, they probably would be pushing for a windfall tax. But there are three reasons why I don't think it will happen. One is that there was a share buyback program that the government of Canada introduced the tax on share buybacks, which is seen as an attack really directed against the oil and gas companies in Western Canada. And I think that, well, could be argued represents Ottawa's taking of a pound of flesh without going to a windfall tax. So you could say that they've had a kick at that can, that's number one. Number two, I don't think at this moment in our history with all the other fights going on that the government of Canada particularly want to pick on a huge national unity issue in a fight with the West Saskatchewan and Alberta on this issue. And it will be seen by Alberta and Saskatchewan as a direct attack on them and their industries. So that would inflame an already raw situation. But thirdly and most persuasively, unlike other countries in the world, the Western producers are engaged in an extraordinarily serious conversation with Ottawa and the province of Alberta around a major carbon reduction program. It is called the Pathways Project, and it involves the expenditure of tens of billions of dollars to capture and sequester carbon, and it involves building large trunk lines, involves opening a pore space, it can only be done with the cooperation of three levels of government-- of the two levels of government and industry. It's involving a significant tax concession that was made by the government of Canada to match that in the United States, but it's a big complicated program, industry is heavily committed to it, but is going to involve many billions, tens of billions of dollars from industry to make it happen. And I think that there would be-- there potentially could be a major blow to cooperation if an attack were to be made on the oil and gas company. So that would be the third reason why I think it's unlikely to take place. Look, on the bright side as Canadians at this moment in time, we need to celebrate the richness of our energy sector. They're filling in a big hole in the world now that it's badly needed. They're filling in a big hole in the coffers of government. Alberta has gone from a large deficit to a $12-billion surplus, government of Canada has cut their deficit in half, the board that I'm on, Canadian Natural, we're going to pay this year in royalties and taxes I think $12 billion alone, that single company. So all Canadian governments and Canadian citizens are going to benefit hugely from the current success of our energy companies. So we don't want to do anything that will choke the goose that's laying the golden egg either.
PETER HAYNES: I'm going to just go over to the UK here, one of the countries that has a windfall tax in place just as we finish up here, to talk about the new government. We have spoken about some of the troubles that Liz Truss went through, and now we've got a new leader in the UK by the name of Rishi Sunak. And last weekend there was a story in the Sunday Times that suggested that senior figures in that current government were seeking closer ties with Europe in what they're calling a, quote, "Swiss-style trading arrangement" with Europe. Brexit hardliners were mad at this language, but it is a simple fact that as younger people in Britain enter the voting class, support for Brexit lessens. And the current government that's out there today is struggling to come up with, quote, "any positives from Brexit." With that in mind, are you sensing that there's any softening of support for Brexit that would lead to an eventual reunion with Europe, or even at the very least a Swiss-style trading arrangement?
FRANK MCKENNA: Yeah. Well, increasingly, you're hearing people in the UK talk about Regrexit instead of Brexit, and with good reason. By the way, I think that the UK from outside looking in appears to have adult leadership at both the prime minister and the chancellor level. And I think they're in for a long, tough winter regardless of that, and a tough few years ahead of them. But at least, I think, there's a general sense of confidence from the market in the leadership. And there's no doubt they're paying a bitter, bitter price for the misinformation and the delusion around Brexit. And they were led there by Boris Johnson and others like him talking about how there would be almost garlands in the street, windfalls available to fund national health, and all kinds of other wonderful things, none of which unfolded. Instead they've reaped a bitter harvest of anger in Northern Ireland over this, and Scotland threatening to separate over it, massive complexities in trying to unravel their European association. I saw one article saying that it could take as many as four or five years just to unravel all the documentation and get the United Kingdom to be actually truly independent. So in the meantime, they're paying a huge price for this massive mistake. Having said all of that, boy, I sure don't hear many people making an argument now that Brexit was a good idea. But having said that, the political consequences of trying to reverse it would be just too severe. So the direct answer to your question is I don't think anybody has the temerity to try to reverse Brexit, and quite frankly, the complexity of doing that would probably leave the UK reeling again. So in the foreseeable future, no.
PETER HAYNES: How can they get to some sort of closer arrangements with respect to the trade arrangements with Europe? I know that we talked previously about the Good Friday Agreement impacting Northern Ireland, and how that has been brought into question recently. But can you see any sort of softening of the hard line with respect to trade going both directions?
FRANK MCKENNA: Well, in some ways it's in the interest of all parties to have a deal and have a better trading platform. But I think for the UK they're in a very disadvantaged position in the negotiations, they've lost thousands, maybe tens of thousands of finance jobs to other European capitals, they're just bleeding all over the place on every front, and they're really not in a very strong bargaining position. So I think at the end of the day, they're likely to have some kind of a Swiss-style trading arrangement with Europe. I don't particularly see any way to change that. It's hard getting the genie back in the bottle. I'd love to see mealy-mouthed politicians there who promised so much now explain the disaster that's befallen the UK as a result of this. And they're trying to do free trade negotiations with the United States, for example, and the United States under Joe Biden's leadership is saying, look, you tell me that the Good Friday Accords will not be affected, and the state of Ireland-- or the integrity of the progress we've made in Ireland will be protected, and maybe we can talk. So there's a lot of unforeseen consequences here playing out. And I think it's just going to take time before the UK gets to a better place.
PETER HAYNES: It's a classic case, too, Frank, in my world of you've got to be careful about the numbers. People will look at the performance of various country benchmarks around the world, and they'll see that the FTSE is the best performing benchmark of any country in the world, and yet its economy is probably one of the worst. And it has to do with the make up of the securities in their benchmark, and not necessarily any correlation with the local economy. And that's certainly not the case anymore when you look at benchmarks around the world. You actually should look probably at small cap securities within a local country as a better indication of how the local economy is performing, and if you were to take the FTSE and look at its small cap components, you would see a much, much different picture than the large caps. But I get that question a lot, and I think it's a perfect example where you don't want to look at the benchmark and just correlate that to how well the country has performed. So I want to just finish up here because I know of all the different things you're involved in Frank, the one thing missing from your resume is GM of a Major League Baseball team. And I know you want to be a GM, it might not be too late yet, but you got a chance here to be the Blue Jays GM. They just did a big deal here. They got the swing-and-miss reliever out of Seattle in Eric Swanson but the price tag was very high, and somebody I know you like a lot, and that was Teoscar Hernandez going the other way. Proponents of this deal will believe that that freed up money that they were going to have to pay Hernandez will be spent elsewhere. So you put your GM hat on for us Frank, what would you like to see the Blue Jays do next?
FRANK MCKENNA: Well, Peter, and if anybody's listening, I would do this for nothing. I could save the Blue Jays a lot of money because I would do this for nothing. Bottom line is it hurts me to see Teoscar Hernandez go. He had a smile that would light up part of Toronto. He was a good human being. The vibe in the clubhouse with him was tremendous. He was just such a happy warrior. And on the other hand, and there always is another hand, he wasn't always the healthiest baseball player. He missed all of-- just about every year, part of every year. His defense was average at best, probably less than average. He had lots of speed, but he didn't have a real great baseball IQ, and so he really wasn't much of a base stealer, et cetera. So he wasn't able to use all his natural tools, but he was the Silver Slugger, and so it's a big hole in the lineup. So it's pretty clear what we need is an outfielder. We can't take George Stringer's health for granted, and so we need a really strong outfielder. We need to move Stringer out of center field, give him some relief in one of the other fields. So we need a really strong outfielder. I think an intriguing experiment, by the way, I don't know if you noticed it, but for a day or two in the fall, they had Gabriel Moreno playing just about every position on that team. And he's a guy that's got a very high speed, great baseball IQ, if you could ever make him into an outfielder, it would solve a problem you have of having three all-star catchers. I just hate to see us give up any of them, and so I would love it if they could find another role for Moreno. But absent that, they're going to need to fill in some pieces. They probably need another shutdown pitcher. I don't know that they can rely on Ryu and perhaps even Kikuchi. They're going to have to figure out whether one of those guys or both of those guys can actually be that fourth or fifth starter on a consistent basis. I think they're absolutely definitely going to need outfield help, though, and that could be Brandon Nimmo, or it could be Cody Bellinger, could be Bryan Reynolds, could be Ian Happ, or Jesus Sanchez, but they definitely-- And they have cap space. They could swing for the fences and land us a really big fish if they want to. And I think they're at the stage very soon, Peter, where they've got all this young talent under contract, and I think they have to go for it, and that means really digging deep and putting some real head turners in a couple of those positions, starting pitching and/or an outfielder. What do you think?
PETER HAYNES: Well, Justin Verlander would fit right in at the top end of our rotation, I agree with you on that. And there was one commonality amongst the five potential free agent outfielder signings, and that was they were all left-handed bats. And I think that's pretty much got to be at the top of the shopping list is get a little bit less right-handed in that lineup. So I like Bellinger, I think that's a really, really interesting prospect, and he got released out of his contract in LA, and it didn't end well, but he was the MVP of the league three or four years ago, and the MVP of the World Series a couple of years ago, so he's definitely an interesting prospect. And although I don't know if we have time for projects right now, just to the point you're making Frank, we're in win-now mode for sure, and so I think they'll spend some money. I definitely agree. There are lots of holes in that lineup. It's not a perfect 25-person or a 26-person roster, and so they got a lot of work to do, but it sounds like they got the money in. And I don't know if you've seen any of the pictures of the SkyDome right now, it's being-- Rogers Center, they've ripped it up, and they're redoing the fifth deck and moving the bullpens or raising the bullpens in the outfield. It's going to be an interesting look. They're putting $300 million into that place, so it'll definitely be an interesting look for us next spring when we get back to baseball.
FRANK MCKENNA: Absolutely.
PETER HAYNES: All right. Well, thanks for your time Frank, and have a great holiday season here, and we'll look forward to chatting with you again early in the new year.
FRANK MCKENNA: OK. Thank you, Peter.
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Managing Director and Head of Index and Market Structure Research, TD Securities
Managing Director and Head of Index and Market Structure Research, TD Securities
Managing Director and Head of Index and Market Structure Research, TD Securities
Peter joined TD Securities in June 1995 and currently leads our Index and Market Structure research team. He also manages some key institutional relationships across the trading floor and hosts two podcast series: one on market structure and one on geopolitics. He started his career at the Toronto Stock Exchange in its index and derivatives marketing department before moving to Credit Lyonnais in Montreal. Peter is a member of S&P’s U.S., Canadian and Global Index Advisory Panels, and spent four years on the Ontario Securities Commission’s Market Structure Advisory Committee.
Deputy Chair, TD Securities
Deputy Chair, TD Securities
Deputy Chair, TD Securities
As Deputy Chair, Frank is focused on supporting TD Securities' continued global expansion. He has been an executive with TD Bank Group since 2006 and previously served as Premier of New Brunswick and as Canadian Ambassador to the United States.