WEBVTT - Surveillance: Phase One Deal Will Be Cosmetic, Coronado Says 0:00:09.840 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.400 Bloomberg dot Com, and of course on the Bloomberg. We're 0:00:27.440 --> 0:00:29.760 pricing at extrets, We're pricing out a recession. I don't 0:00:29.760 --> 0:00:31.880 think we're pricing in an acceleration of growth, and that 0:00:31.920 --> 0:00:35.000 distinction maybe explains that huge sentiment shifts over the last 0:00:35.040 --> 0:00:36.560 couple of weeks. I want to bring it down on 0:00:36.640 --> 0:00:39.040 BMP Para, our chief US economist and head of Markets 0:00:39.080 --> 0:00:42.120 three sixty North America. Good morning, tit down morning. Let's 0:00:42.159 --> 0:00:44.519 talk about it, shall we. We've had a massive sentiment 0:00:44.600 --> 0:00:47.120 shift in global markets over the last couple of months. 0:00:47.120 --> 0:00:50.440 We've had the bears over the weekend finally starting to capitulate. 0:00:50.440 --> 0:00:53.080 What's your message at the moment. So I don't think 0:00:53.120 --> 0:00:56.600 we're out of the woods here here. Um As as 0:00:56.640 --> 0:01:00.760 Tom just mentioned, both the various fair now casts on 0:01:00.760 --> 0:01:04.160 our own now casts are suggesting that this quarter is 0:01:04.160 --> 0:01:05.920 going to shape up to be a pretty ugly one. 0:01:06.440 --> 0:01:09.959 Uh And it's my view that the weakness that we're 0:01:09.959 --> 0:01:11.920 going to see this quarter is actually going to spill 0:01:11.959 --> 0:01:13.959 over into next How does it spill over? Because that's 0:01:14.000 --> 0:01:16.080 the distinction of the bulls and the bears here on 0:01:16.160 --> 0:01:19.640 GDP growth is the spillover effect? How does it spill 0:01:19.680 --> 0:01:22.679 over into the next quarter? Um? It Basically the consumer 0:01:23.040 --> 0:01:25.880 um is, while it's going to be resilient, it cannot 0:01:26.400 --> 0:01:31.720 remain immune from this big a synchronized global manufacturing downturn. 0:01:31.840 --> 0:01:34.680 We saw this back in two thousand fifteen sixteen, where 0:01:34.720 --> 0:01:37.720 we saw two quarters of very subpar growth. I think 0:01:37.720 --> 0:01:40.600 we're going to see it again. What about export import dynamics? 0:01:40.720 --> 0:01:45.600 Um So, Yeah, with x US global growth the weakest 0:01:45.680 --> 0:01:48.640 we have seen in five years. Uh um, we think 0:01:48.680 --> 0:01:50.640 that exports are going to get a and John, this 0:01:50.720 --> 0:01:54.320 is killing Forget about imports and trade war export of 0:01:54.360 --> 0:01:57.680 American product? What do you export to? You know that 0:01:57.800 --> 0:02:00.920 that just that partial difference Menchel in the next year. 0:02:01.000 --> 0:02:02.360 So what does it mean for the FED view? I'm 0:02:02.360 --> 0:02:04.640 going to quote your research and our view FED policy 0:02:04.640 --> 0:02:07.280 will shift from mid cycle adjustment to an extended the 0:02:07.320 --> 0:02:10.840 patient easing cycle of one hundred and fifty basis points. 0:02:11.120 --> 0:02:12.919 Put some meat on those bonds. What does that mean 0:02:13.280 --> 0:02:17.200 so precisely, What that means is we see another round 0:02:17.840 --> 0:02:21.600 um of insurance cuts sort of coming something along the 0:02:21.639 --> 0:02:27.560 lines of basis points. Once the FED realizes, uh, that 0:02:27.880 --> 0:02:31.000 it's not going to be just one quarter isolated quarter 0:02:31.080 --> 0:02:34.160 of weakness but against bill, when do we stop? When 0:02:34.200 --> 0:02:36.240 do we stop calling them insurance cuts? When we're back 0:02:36.320 --> 0:02:38.359 down to zero? I have to wonder, you know, at 0:02:38.360 --> 0:02:41.720 this point we're entering into accommodative. Major central banks increase 0:02:41.720 --> 0:02:45.200 the balance, She's by the most in October since December. 0:02:45.320 --> 0:02:49.720 Why isn't that going to fuel perhaps a bookcase. So 0:02:49.760 --> 0:02:52.840 I think it actually is supporting sentiment right now, but 0:02:53.240 --> 0:02:55.560 we have to remember that Marthy policy works with a 0:02:55.680 --> 0:02:59.280 lag uh and uh. While I think the markets are 0:02:59.400 --> 0:03:03.000 very happy that the previous sort of cycle of insurance 0:03:03.000 --> 0:03:06.120 cuts has been successful in reducing the downside risk of 0:03:06.160 --> 0:03:10.919 a recession, we think of that again. The weakness that's 0:03:10.919 --> 0:03:15.400 spilling over into services into consumers will mean that the 0:03:15.400 --> 0:03:20.120 FED is going to have to um enter another um 0:03:20.280 --> 0:03:23.640 short and and patient, yes, but still never less another 0:03:23.639 --> 0:03:27.120 easing cycle. Is it back to ston Fisher's ultra accommodative 0:03:27.680 --> 0:03:29.760 because the chart would suggest so. If you get the 0:03:29.800 --> 0:03:32.560 number of right cuts you're talking about, right, and that's 0:03:32.600 --> 0:03:36.080 exactly the context that we're working here. We are over 0:03:36.160 --> 0:03:40.160 reliant upon central banks to do everything, um and every 0:03:40.200 --> 0:03:43.760 single time the markets could so then what was that? Well, 0:03:43.800 --> 0:03:45.840 this is important. What was the headline last week? One 0:03:45.840 --> 0:03:48.000 of the FED speakers, maybe it was Powell, you were 0:03:48.040 --> 0:03:50.760 doing a John in one headline talked about asset bubbles. 0:03:51.080 --> 0:03:53.720 You know they didn't use that language, but is now 0:03:53.840 --> 0:04:01.160 twenty eight asset bubble. I think we'll no hindsight whether 0:04:01.200 --> 0:04:03.520 it needed is a bubble or not. Um. I do 0:04:03.600 --> 0:04:07.520 think that there is some underlying strengths within trend growth 0:04:07.560 --> 0:04:10.920 in the economy that suggests that, you know, maybe in 0:04:10.920 --> 0:04:14.720 the long term of these equity levels are justified, but 0:04:14.800 --> 0:04:17.200 certainly in the shorter term data. I sort of see 0:04:17.240 --> 0:04:20.560 a lot of people, uh, you know, breathing size of 0:04:20.600 --> 0:04:26.120 relief that the trade deal is almost there, and I'm 0:04:26.640 --> 0:04:29.560 frankly sort of switching my head here saying you're starting 0:04:30.000 --> 0:04:32.840 I'm on a triple. Ever, did you see how he 0:04:32.880 --> 0:04:36.840 answered that question? That was like BMP message very pause pause, 0:04:37.360 --> 0:04:42.680 He's got his look in the future. Ever, Crater will 0:04:42.720 --> 0:04:45.599 know in this can I get to the take from UBS. Okay, 0:04:45.680 --> 0:04:47.920 UBS of one of the banks, one of the group 0:04:48.839 --> 0:04:51.039 over the last couple of weeks, over the last week, 0:04:51.080 --> 0:04:54.760 that has raised that global equity upgrade. They've lifted things. 0:04:54.760 --> 0:04:57.000 So I'm Morgan Stanley, JP, Morgan and UBS. This is 0:04:57.000 --> 0:04:58.760 the UBS take, and I want you to pick out 0:04:58.760 --> 0:05:01.560 the bit that you would push back hardest. Done. UBS 0:05:01.640 --> 0:05:04.880 c IO Mark Hafully saying the following, we upgrade on one. 0:05:05.200 --> 0:05:08.640 The US China trade negotiations have made progress to Central 0:05:08.640 --> 0:05:12.120 Bank accommodation has increased. Three earnings expectations of fallen, and 0:05:12.240 --> 0:05:16.000 four there are tentative signs of economic stabilization. Of those 0:05:16.040 --> 0:05:19.040 four points, what are you pushing back on the most 0:05:19.080 --> 0:05:22.360 at the moment? Probably number one and number four. Um, 0:05:22.400 --> 0:05:27.359 I think that first on the US trying to trade talks, yes, uh, 0:05:27.400 --> 0:05:30.760 the prognosis looks reasonably good for there to be a 0:05:30.800 --> 0:05:34.040 phase one deal. But that's because Phase one contained all 0:05:34.040 --> 0:05:36.760 of the easy stuff and all the harder stuff has 0:05:36.800 --> 0:05:40.000 been kicked off to to phase two. And speaking with 0:05:40.040 --> 0:05:43.680 my former colleagues both at State and at US TRUM, 0:05:44.200 --> 0:05:46.000 I don't I don't see a reason why we should 0:05:46.000 --> 0:05:49.400 be any more confident about a phase two than we 0:05:49.400 --> 0:05:52.080 were on the competencive deal six months earlier. What are 0:05:52.080 --> 0:05:54.880 they saying? How that? How how that ended? Those conversations 0:05:54.880 --> 0:05:57.239 with the former colleagues. What are they saying. So they're saying, 0:05:57.480 --> 0:06:01.200 UM that Uh, you know, of course the boilerplate language 0:06:01.480 --> 0:06:05.760 that you know, negotiations continue, and they can't specify any 0:06:05.800 --> 0:06:09.240 any details. But they did emphasize how important it was, 0:06:09.320 --> 0:06:11.960 both to Ambassador Lightheiser and to the U S general 0:06:12.000 --> 0:06:16.440 negotiating stance, that there be an enforcement mechanism to ensure 0:06:16.480 --> 0:06:20.920 that the commitments of the Chinese make are indeed actually executed. UM. 0:06:21.040 --> 0:06:24.599 And that remember had tripped up the deal before. UM. Again, 0:06:24.640 --> 0:06:26.280 I don't see why we should be more optimist. So 0:06:26.320 --> 0:06:29.360 these are officials working in the administration right now. They're 0:06:29.440 --> 0:06:31.919 essentially telling you that if we don't have an enforcement mechanism, 0:06:32.279 --> 0:06:35.200 we don't have a deal. That's right, UM. And an 0:06:35.200 --> 0:06:37.640 Ambassador Lighthiser has been very public about that, both in 0:06:37.680 --> 0:06:42.839 testimony before Congress as well as in general. UM. It's understandable, UM, 0:06:43.200 --> 0:06:45.839 given the context. But that sort of means that they're 0:06:45.839 --> 0:06:48.640 going to really have to wrestle out this very difficult 0:06:48.839 --> 0:06:52.360 sort of aspect to the negotiations before we can really 0:06:52.400 --> 0:06:55.920 see an end to US China trade policy concertainty. And 0:06:56.000 --> 0:06:59.480 that is not including all the other aspects around geopolitics 0:06:59.520 --> 0:07:02.880 and rountic oology around you know, Hong Kong, Roan Shinjong 0:07:03.440 --> 0:07:05.880 that is also heating up the temperature drum. Thank you 0:07:05.920 --> 0:07:24.280 so much, Daniel, and thanks to this morning the Interview 0:07:24.320 --> 0:07:26.920 of the day on a RAMCO and you can do 0:07:27.000 --> 0:07:30.560 this with Ellen Wald the Atlantic Council Global Energy Center. 0:07:30.600 --> 0:07:34.000 Her book Saudi Inc. Is definitive. I take it back 0:07:34.000 --> 0:07:36.280 to Robert Lacey and his book on the Kingdom of 0:07:36.320 --> 0:07:41.520 Saud of years ago. Saudi Inc. Is just absolutely superb Ellen. 0:07:41.800 --> 0:07:45.520 This deal is not working out the headline this morning 0:07:45.520 --> 0:07:47.920 they're going to cancel the London road show, They're not 0:07:47.920 --> 0:07:50.920 going to do a New York road show. What do 0:07:51.200 --> 0:07:58.000 institutions know that the retail in Saudi having this force 0:07:58.200 --> 0:08:02.040 down their throats don't know? What do we know where 0:08:02.040 --> 0:08:06.360 we're saying we're not doing this transaction? Well, I think 0:08:06.400 --> 0:08:10.840 that the institutions, at least outside Saudi Arabia know that 0:08:11.240 --> 0:08:14.240 this is a an I p O that's being forced 0:08:14.360 --> 0:08:19.440 for um in many ways political reasons and that it's 0:08:19.480 --> 0:08:24.400 a company that's controlled by an absolute monarch who may not, 0:08:24.640 --> 0:08:28.440 in fact probably will not, given its history, make decisions 0:08:28.560 --> 0:08:30.880 about the company that are in the best interests of 0:08:30.920 --> 0:08:35.520 the company. And these institutional investors, these foreign funds, know 0:08:35.920 --> 0:08:39.520 that if they're invested in this, they will have absolutely 0:08:39.640 --> 0:08:44.880 no legal recourse when when the government decides to use 0:08:44.960 --> 0:08:47.600 the company for its own own purposes. You know when 0:08:47.600 --> 0:08:49.839 Ali Baba came out, I remember the up war over 0:08:49.960 --> 0:08:53.840 Grand came An Island accounting. Um, your epilogue is for 0:08:53.960 --> 0:08:57.319 their sons. Do the sons of the Kingdom of Saud 0:08:57.440 --> 0:09:01.120 have legit accounting for a Ramco or can you suggest 0:09:01.160 --> 0:09:03.559 that we actually don't even know what the balance sheet is. 0:09:04.720 --> 0:09:07.360 I think the balance sheet is probably I think that 0:09:07.400 --> 0:09:11.040 the accounting is probably pretty solid going here. I mean 0:09:11.120 --> 0:09:14.439 we we we knew going into this that Saudi Aramco 0:09:14.679 --> 0:09:17.240 was the most profitable company in the world. We didn't 0:09:17.280 --> 0:09:19.920 know quite how much. I think the accounting is pretty solid. 0:09:19.960 --> 0:09:23.120 It's really the decision making that's the issue. And the 0:09:23.120 --> 0:09:27.040 biggest question is the reason that Saudi Aramco has been 0:09:27.120 --> 0:09:31.000 so profitable over the years is precisely because the sons 0:09:31.160 --> 0:09:35.600 of avdilosis. Even so, left the company alone, They let 0:09:35.600 --> 0:09:38.680 it do its sting. They left the oil men make 0:09:38.760 --> 0:09:42.079 the best decisions for the long term profitability of the company, 0:09:42.280 --> 0:09:45.960 and that helped the country. Now that's not necessarily the case. 0:09:46.000 --> 0:09:49.679 In fact, the spines are increasingly clear that this isn't 0:09:49.679 --> 0:09:52.320 going to be the case. And that really what this 0:09:52.880 --> 0:09:56.920 next generation of sons, the grandsons want to do is 0:09:57.000 --> 0:09:59.480 they want to gut the company for their own purposes. 0:10:00.040 --> 0:10:03.640 Want That isn't a good sign for investors who want 0:10:03.640 --> 0:10:06.120 to make money on this, Helen, Why is a Ramco 0:10:06.200 --> 0:10:08.280 going ahead with this I p O if we can 0:10:08.280 --> 0:10:11.360 call it that to raise billion dollars They targeted a 0:10:11.400 --> 0:10:14.280 hundred billion dollars. They're getting it from their local investors 0:10:14.320 --> 0:10:17.559 with leveraged cash. Apparently, why not just call it a 0:10:17.640 --> 0:10:21.400 day and and do it another time? Yeah, And and 0:10:21.520 --> 0:10:23.920 I really I've been saying that they should do this, 0:10:23.960 --> 0:10:26.840 particularly after the attacks on on Upkake and whole racism, 0:10:26.840 --> 0:10:28.920 and you know, this is a really good opportunity to 0:10:28.960 --> 0:10:31.880 take a step back, take a breather, and reevaluate the 0:10:31.920 --> 0:10:35.640 merits of this, because it's not going to bring in 0:10:35.720 --> 0:10:38.000 the kind of foreign cash they were looking for. And 0:10:38.080 --> 0:10:40.719 so what the i p O has essentially become is 0:10:40.760 --> 0:10:45.920 a transfer of wealth from Saudi financial institutions, wealthy Saudis, 0:10:46.160 --> 0:10:50.319 Saudi businesses, and Saudi just just general Saudi citizens. It's 0:10:50.360 --> 0:10:53.040 become a transfer of wealth from them to the government 0:10:53.520 --> 0:10:56.080 and that's going to tie up a lot of capital 0:10:56.520 --> 0:10:58.880 in this i p O. They couldn't be used for 0:10:58.920 --> 0:11:02.559 all sorts of other actual economic diversification in the country. 0:11:02.840 --> 0:11:05.160 And then can we call this Saudi Arabia's version of 0:11:05.160 --> 0:11:09.880 a billionaires wealth tax? M um, except that it's not 0:11:09.960 --> 0:11:14.160 all for billionaires. You've also got regular Saudis who are 0:11:14.480 --> 0:11:17.880 taking out mortgages on their homes, they're selling other stocks, 0:11:17.920 --> 0:11:21.880 they're they're borrowing money to invest in this. So it's 0:11:21.920 --> 0:11:25.160 not it's not just a billionaire wealth sex it's it's 0:11:25.200 --> 0:11:29.240 basically attack. Now they will get equity in this company, 0:11:29.679 --> 0:11:31.800 but it's going to be locked up for at least 0:11:31.880 --> 0:11:34.960 six months, and that's gonna mean there's very little liquidity 0:11:35.000 --> 0:11:38.719 after the shares start trading, and um, it could we 0:11:38.800 --> 0:11:41.360 could see the creation of a bubble. And then if 0:11:41.400 --> 0:11:44.080 other investors say they do end up getting these Russian 0:11:44.200 --> 0:11:48.360 or Chinese cornerstone investors. Those people might start selling within 0:11:48.559 --> 0:11:53.120 these six months, whereas regular Saudias can't or are incentivized 0:11:53.160 --> 0:11:56.640 not to. And we could find that after an initial 0:11:56.720 --> 0:11:59.839 bump up in price, it could drop like a stone. 0:12:00.120 --> 0:12:03.360 Could this be a threat to social stability and explore 0:12:03.400 --> 0:12:06.240 that a little bit further. Yeah, that's that's the next 0:12:06.320 --> 0:12:09.320 question to ask is what's going to happen with political 0:12:09.320 --> 0:12:12.880 and social stability in Saudi Arabia Because this i p 0:12:13.000 --> 0:12:16.360 O was promised to them politically, was promised to them 0:12:16.760 --> 0:12:19.719 as both something good for them and good for the economy, 0:12:20.000 --> 0:12:23.080 good for their their future prospects, and if that doesn't 0:12:23.120 --> 0:12:26.920 pan out, there could be issues, especially in a region 0:12:26.960 --> 0:12:32.400 that is now basically on fire with UH with protesters 0:12:32.600 --> 0:12:36.719 who are protesting the lack of economic opportunity, and this 0:12:36.800 --> 0:12:39.480 could really bring this to the fourth Saudi Arabia has 0:12:39.520 --> 0:12:43.520 traditionally been you know, very very stable. People have really 0:12:43.559 --> 0:12:46.400 not been interested in protesting. I mean, I think during 0:12:46.440 --> 0:12:50.080 the Arab Spring they had a protest with maybe five protesters. 0:12:50.880 --> 0:12:55.640 But when you're talking about people's livelihoods, different different issues 0:12:55.679 --> 0:12:58.920 arise and and we could definitely see some social instability 0:12:58.960 --> 0:13:00.640 as a result. What is a Ramco do with the 0:13:01.120 --> 0:13:04.400 billion dollars? Well, Ramco is not actually getting the twenty 0:13:04.400 --> 0:13:07.120 five billion dollars, which is which which is the irony 0:13:07.160 --> 0:13:09.480 of it all. Ramco doesn't need twenty five billion dollars. 0:13:09.480 --> 0:13:13.080 They're spending forty billion dollars on Capex. You know, they 0:13:13.120 --> 0:13:17.040 don't need this money. It's the Saudi government that's getting it. Uh. 0:13:17.040 --> 0:13:18.959 And what is it the day think they're going to 0:13:19.040 --> 0:13:21.200 do with billion dollars? I don't think this is really 0:13:21.240 --> 0:13:24.520 about the billion dollars. This is about the fact that 0:13:25.040 --> 0:13:27.960 they want to sell shares and more shares of Ramco, 0:13:28.040 --> 0:13:31.160 put more shares on the market later to generate cash 0:13:31.160 --> 0:13:35.640 when they need it for their interesting and somewhat bizarre 0:13:36.280 --> 0:13:40.559 uh project megaprojects. And so it's not necessarily about the 0:13:41.120 --> 0:13:43.640 billion they're going to get now. It's about the shares 0:13:43.679 --> 0:13:45.440 that they're going to sell and the money they hope 0:13:45.440 --> 0:13:47.680 to make on it later. Self. Bank gets on the 0:13:47.679 --> 0:13:50.439 phone straight after the I p O gives him a call, 0:13:50.559 --> 0:13:52.800 said you've got some spare money, can we invest it 0:13:52.880 --> 0:13:55.160 for you? Is that where this is going to Well? No, 0:13:55.280 --> 0:13:57.560 I think it's very and I think that's a really 0:13:57.600 --> 0:14:00.600 important point, particularly after the zaniness of Off Bank in 0:14:00.600 --> 0:14:03.640 their combo with Yahoo Japan and I think it's called 0:14:03.720 --> 0:14:09.320 live z company whatever this weekend, I mean this this 0:14:09.320 --> 0:14:12.760 this a Ramco, which was so prestigious when we were kids, 0:14:12.760 --> 0:14:14.520 like to have a job with a Ramco, was this 0:14:14.640 --> 0:14:18.480 huge deal, etcetera. To consult with them whatever? I mean, 0:14:18.520 --> 0:14:21.720 do they understand there's a rule book out there institutionally 0:14:21.760 --> 0:14:23.760 you have to go by. Do do you have any 0:14:23.840 --> 0:14:27.720 research within Saudi inc That they understand their rules of 0:14:27.800 --> 0:14:32.800 the road in bringing a transaction public? Well, this is 0:14:32.800 --> 0:14:36.960 a really good question, and it seems that a Ramco. 0:14:37.840 --> 0:14:40.880 Ramco was pretty well well versed in these issues. I mean, 0:14:41.280 --> 0:14:44.280 they got their books in order. It's really I think 0:14:44.320 --> 0:14:47.680 from from what I hear from courses and inside, is 0:14:47.800 --> 0:14:52.320 that the political that the monarchy who's pushing this, whose 0:14:52.360 --> 0:14:55.560 idea this was, it was not getting good advice, is 0:14:55.600 --> 0:14:59.600 being advised by people who are not specialists or experts 0:14:59.680 --> 0:15:02.680 in I p O s. And that that's one of 0:15:02.680 --> 0:15:06.280 the reasons that it really was bungled and kind of 0:15:06.800 --> 0:15:10.560 done in a very backwards, non traditional way, that that 0:15:10.720 --> 0:15:14.000 frankly foreign investors really aren't interested in this could have 0:15:14.040 --> 0:15:17.440 been great. This company is great. This I Peo could 0:15:17.520 --> 0:15:20.600 have been great had they had they done the right way. 0:15:20.800 --> 0:15:23.000 Ellen will thank you so much. I can't say enough. 0:15:23.040 --> 0:15:27.440 Saudi inc. The Arabian Kingdom, pursuit of oil. I'm just extraordinary, 0:15:27.440 --> 0:15:45.520 extraordinary book. Have you ever been to the O two 0:15:45.600 --> 0:15:48.440 out in Greenwich? What do you see that actually went 0:15:48.480 --> 0:15:52.160 there for the Olympics And they do like big concerts 0:15:52.160 --> 0:15:56.160 and all that there out there's the Intercontinental which is 0:15:56.160 --> 0:15:59.720 where they held this conference today where the elite meat 0:15:59.720 --> 0:16:03.480 degree eaten, the Kennedy show up, labor parties. Jeremy Corbyn 0:16:03.800 --> 0:16:06.320 was over there. He caught up with Bloomberg's and Edwards 0:16:06.440 --> 0:16:08.520 in London in the last hour or so. I'm pleased 0:16:08.560 --> 0:16:10.760 to say that Ann Edwards joined us on the phone 0:16:10.760 --> 0:16:12.720 to talk about that interview. Anna, great to have you 0:16:12.760 --> 0:16:15.520 with us on the program. So let's discuss it. Jeremy 0:16:15.520 --> 0:16:18.320 Corbyn according to the polls over the weekend, falling further 0:16:18.360 --> 0:16:21.640 behind the Conservative Party led by Boris Johnson. What did 0:16:21.640 --> 0:16:25.120 he say about closing that gap? Yeah, he says he 0:16:25.200 --> 0:16:27.600 can close the gap. He says he's enjoying and trying 0:16:27.640 --> 0:16:30.040 to close that gap. And that's best done by getting 0:16:30.040 --> 0:16:32.920 out there in campaigning, which is no small feet when 0:16:32.920 --> 0:16:35.400 it's getting colder and darker and wester the closer we 0:16:35.440 --> 0:16:37.840 get to election on December the twelve here in the UK, 0:16:38.200 --> 0:16:40.520 and so just that, yeah, just catch up on the polling. 0:16:40.560 --> 0:16:43.800 There were three over the weekends that gave the Conservative 0:16:43.800 --> 0:16:47.080 Party in Boris Johnson a double digit percentage point league 0:16:47.400 --> 0:16:50.800 over Jeremy Corbyn, although the Labor Party are also always 0:16:50.880 --> 0:16:53.680 quick to remind us how much damage they did for 0:16:53.760 --> 0:16:57.360 threason aids lead back in two thousands and seventeen. Other 0:16:57.400 --> 0:17:01.120 parallels here Anna before between now and he's seventeen, and 0:17:01.200 --> 0:17:03.640 the gap, the distance between the two parties coming into 0:17:03.680 --> 0:17:07.399 the election. Well, the similarity is that we started with 0:17:07.720 --> 0:17:10.000 a situation where the Conservative Party has a big leave 0:17:10.280 --> 0:17:13.800 and that's why both leaders to Evenate and Boris Johnson 0:17:14.680 --> 0:17:17.000 feel that they can take these gambles of getting us 0:17:17.040 --> 0:17:20.600 into early election situations. But that's maybe where the parallels end. 0:17:20.680 --> 0:17:23.240 I mean, Boris john a very different campaigners. Certainly the 0:17:23.280 --> 0:17:26.760 Conservative Party believe Boris Johnson is a very different campaigner 0:17:26.920 --> 0:17:30.000 and he certainly hasn't been losing right up to this point. 0:17:30.160 --> 0:17:32.960 You know, you're our best student of this. Okay, it's CBI. 0:17:33.040 --> 0:17:35.840 Everybody trots up to you know, get the corporate message 0:17:35.840 --> 0:17:39.360 and all that, and they're preaching to the business community. 0:17:39.640 --> 0:17:43.640 Is the nation transfixed by this election? I mean, compared 0:17:43.680 --> 0:17:46.320 to all the other elections you've covered, how does this 0:17:46.359 --> 0:17:49.199 one line up so far? Yeah, there's been a lot 0:17:49.240 --> 0:17:51.440 of talk about how this has This campaign hasn't really 0:17:51.480 --> 0:17:53.399 taken off yet. And to be honest with you, after 0:17:53.440 --> 0:17:57.119 the intensity and the drama around Brexit and the deadline 0:17:57.320 --> 0:17:59.879 at the end of October, it almost felt like the 0:18:00.080 --> 0:18:03.080 country needed to take a break at the beginning of November. 0:18:03.160 --> 0:18:06.400 Those things have had a slow start. But last week 0:18:06.400 --> 0:18:09.240 with the announcement that we got of the intention to 0:18:09.240 --> 0:18:11.960 provide free broadband from the Labor parties, that's something that 0:18:12.040 --> 0:18:16.720 did capture the country's imagination. If you like it, you'd start. 0:18:16.920 --> 0:18:19.560 We also haven't had the manifesto yet. We wait till 0:18:19.560 --> 0:18:22.879 Thursday to get the Labor Party manifesto and the Story manifesto. 0:18:22.920 --> 0:18:25.760 He's coming in sort of drips and drabs, if you like. 0:18:25.880 --> 0:18:29.040 It's slowly being released. I think they're trying to maximize 0:18:29.080 --> 0:18:33.040 media coverage. So yeah, things are slow. Well, Brexit is 0:18:33.080 --> 0:18:35.679 one issue and it's definitely dominated the headlines, but the 0:18:35.720 --> 0:18:39.320 spending plan that Jeremy Corbyn put out possibly having a 0:18:39.400 --> 0:18:42.560 bigger effect on confidence. How is that reading and what 0:18:42.600 --> 0:18:45.320 did you have to say about that? Yeah, I mean 0:18:45.560 --> 0:18:48.240 that he refers you back to the extent of their 0:18:48.320 --> 0:18:51.240 spending colleges and the numbers that they put out there. 0:18:51.240 --> 0:18:53.600 He says that's very trumps sparent. Everybody can see what 0:18:53.680 --> 0:18:55.280 they plan, and he says that we're going to see 0:18:55.280 --> 0:18:57.800 a scale of investment never seen before in the UK, if, 0:18:57.880 --> 0:18:59.880 of course he's Prime minister. The other thing to bear 0:18:59.920 --> 0:19:02.040 in mind is even if he does manage to somehow 0:19:02.080 --> 0:19:05.520 become against the polling evidence become Prime minister, that might 0:19:05.560 --> 0:19:07.440 have to be in some sort of confidence as the 0:19:07.520 --> 0:19:10.639 Blay arrangement with other parties who have their own criteria 0:19:10.640 --> 0:19:14.680 around spending in their own manifesto pledges. So it isn't 0:19:14.680 --> 0:19:18.120 necessarily as simple as taking his manifesto and turning down 0:19:18.119 --> 0:19:20.680 into into a reality if he is in down in 0:19:20.680 --> 0:19:22.880 the Street. But certainly the guilt markets have all been 0:19:22.880 --> 0:19:27.160 pretty transfixed by this idea that whoever we get as 0:19:27.560 --> 0:19:29.600 Prime minister, we're going to end up with a lot 0:19:29.600 --> 0:19:31.960 more physical stimulus in the UK, which is a real 0:19:32.040 --> 0:19:34.280 about face from over the last ten years or so 0:19:34.400 --> 0:19:38.720 talking about austerity, austerity, austerity and belt tightening and the 0:19:38.840 --> 0:19:41.080 virtue of all of that. And now we do seem 0:19:41.119 --> 0:19:43.120 to be in a very different era. And let's wrap 0:19:43.119 --> 0:19:45.520 things up by talking about monetary policy shown we Governor 0:19:45.560 --> 0:19:49.359 Carney is said to leave at the start of Did 0:19:49.400 --> 0:19:51.200 you speak to Mr Corbyn about the future of the 0:19:51.200 --> 0:19:53.919 Bank of England? I did, and I said, you know, 0:19:54.080 --> 0:19:55.920 you'll have a lot to decide if you are Prime 0:19:55.920 --> 0:19:59.280 Minister on December the thirteenth, you have a lot to 0:19:59.320 --> 0:20:01.000 decide that one of the things will be whether you 0:20:01.119 --> 0:20:04.679 ask Mark Arne to stay for another term. Remember he's 0:20:04.680 --> 0:20:06.879 supposed to leave on the steady one to January. And 0:20:06.960 --> 0:20:09.080 he said all he could tell me was that they 0:20:09.080 --> 0:20:11.880 have a very good relationship the Labor Party with Mark Arney. 0:20:11.920 --> 0:20:14.000 I asked him again and he told me again, all 0:20:14.080 --> 0:20:15.680 I can say is you have a very good relationship. 0:20:15.720 --> 0:20:18.560 As if that's perhaps holds some deeper meaning to judge 0:20:18.560 --> 0:20:20.760 for yourself when you see the exchange. He then did 0:20:20.760 --> 0:20:23.159 say he's made no commitment to anybody posts them of 0:20:23.200 --> 0:20:25.960 the twelve very good and Edwards, thank you so much 0:20:25.960 --> 0:20:29.679 on the campaign travel driving forward our television coverage in 0:20:29.720 --> 0:20:32.159 the London early morning in her wonderful work on the 0:20:32.240 --> 0:20:48.480 politics of Europe and the United Kingdom. Right now, Julia 0:20:48.800 --> 0:20:51.880 Carnado joins us from macro policy perspective. Julia, we don't 0:20:51.960 --> 0:20:55.080 usually talk to you about generations of the market across 0:20:55.080 --> 0:20:59.080 the three minute span, but we'll go there this morning. Um, Julia, 0:20:59.440 --> 0:21:03.480 I'm kidding folks. We're gonna get a huge disparity between 0:21:03.600 --> 0:21:07.959 a FED patient and pausing and others really stepping up 0:21:07.960 --> 0:21:10.600 a slower g d P and the FED that will 0:21:10.600 --> 0:21:15.240 still remain active even towards ultra accommodative. How do you 0:21:15.240 --> 0:21:18.719 fit into that mix? Well, I think the FED is 0:21:18.720 --> 0:21:21.840 is justified in taking a pause right now. It was 0:21:21.880 --> 0:21:25.120 a little surprising how strongly they signaled that their on hold. 0:21:25.160 --> 0:21:27.160 I think that what we'll see in the minutes this 0:21:27.200 --> 0:21:31.119 week that reflects some dissension on the committee, some divergence 0:21:31.160 --> 0:21:35.240 of views, but the data do show some stabilization. I think. 0:21:35.560 --> 0:21:38.320 I agree that the optimism has gone a little far 0:21:38.480 --> 0:21:41.919 to hang a lot on these first round trade talks, 0:21:41.960 --> 0:21:46.199 which are really in substance pretty cosmetic uh and and 0:21:46.280 --> 0:21:48.879 the global growth picture. Sure, we might be stabilizing, but 0:21:49.000 --> 0:21:51.280 that's far from saying that we're heading into a new 0:21:51.320 --> 0:21:53.600 renewal of growth. So I think there's a lot of 0:21:53.680 --> 0:21:56.960 uncertainty about the growth outlook. I was struck by a 0:21:56.960 --> 0:22:02.280 Bloomberg Economics projection about the effects of the trade wars 0:22:02.400 --> 0:22:05.359 on the US and the global economy. The biggest drag 0:22:05.400 --> 0:22:08.280 comes from the uncertainty does that go away even if 0:22:08.280 --> 0:22:10.840 we get a trade truth. So yeah, I think you're 0:22:10.920 --> 0:22:13.720 right that that's that's exactly where where we need to 0:22:13.720 --> 0:22:16.399 focus right now, because we see it in the investment data. 0:22:16.520 --> 0:22:19.960 Right there's a there's a divergence between the market sentiment 0:22:20.400 --> 0:22:24.040 that has really taken signal from every sort of hint 0:22:24.160 --> 0:22:26.360 of progress in the in the phase one trade talk 0:22:26.680 --> 0:22:29.320 and what actual businesses are dealing with on the ground, 0:22:29.359 --> 0:22:33.120 which is a tremendous amount of uncertainty that they're judging 0:22:33.160 --> 0:22:36.760 to be sort of a semi permanent feature of the landscape, 0:22:36.960 --> 0:22:39.680 that they're going to have to reorganize global supply chains, 0:22:40.040 --> 0:22:43.280 they're going to have to manage these political risks, and 0:22:43.320 --> 0:22:47.440 that's not something that's you know, conducive to productivity and profitability. 0:22:47.520 --> 0:22:49.760