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Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene.

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Speaker 1: Daily we bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Chann

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Speaker 1: fro On Tim keenan New York looking at global economics

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Speaker 1: and yes, the politics involved as well, and that means

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Speaker 1: in Japan an important election over the weekend. The short

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Speaker 1: answers Abe wins again joining us now Robert Feldman of

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Speaker 1: Morgan Stanley MUFG, their senior advisor in Tokyo. H he

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Speaker 1: is definitive on Japan and their political economics. Robbie, thank

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Speaker 1: you so much for joining us again for at Tokyo.

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Speaker 1: What was the character of this victory for Mr Abbe?

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Speaker 1: The victory was a little bit stronger than I had expected.

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Speaker 1: He has now again got a very strong majority in

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Speaker 1: the Upper House. At the moment, he does not have

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Speaker 1: the two thirds he would need to amend the constitution.

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Speaker 1: There's been a little bit of talk about one of

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Speaker 1: the center left parties may be coming along, but he

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Speaker 1: has all the votes he needs to get major economic

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Speaker 1: legislation through if he chooses to do so. And that

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Speaker 1: is the issue that I think markets are going to

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Speaker 1: start grappling over the next month as they see him

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Speaker 1: redo his cabinet, to see who he appoints, see what

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Speaker 1: the policy priorities are. That is the issue I think

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Speaker 1: is before investors. Now, who votes for Mr Abe? I mean,

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Speaker 1: does he have the support of Iowa, is at the

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Speaker 1: support of New York City? What is the character of

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Speaker 1: his supporters? Well, his supporters are broadly small business um uh,

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Speaker 1: the general public uh, the sort of center right, and

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Speaker 1: a little bit of those who are focused on say

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Speaker 1: agriculture or other industry interests. But I think another very

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Speaker 1: important new support for has come from young people because

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Speaker 1: Primeister obb is the one who pushed and achieved the

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Speaker 1: lowering of the voting age to eighteen. Moreover, if you

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Speaker 1: look at the voting results on some call it litmus

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Speaker 1: issues between call it left and right, such as constitutional reform,

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Speaker 1: what you see is that it's a much larger share

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Speaker 1: of older people who are on the left wing and

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Speaker 1: a much smaller share of young people who are on

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Speaker 1: the left wing, although obviously there are some so I

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Speaker 1: think that's also an important characteristic to look at. Probably

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Speaker 1: we got him back, I don't know, six years to

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Speaker 1: Shinzo Abe, the Prime minister that's talking about sales tax hikes.

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Speaker 1: Are we finally going to get this sales tax hike

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Speaker 1: one and two? What do you expect the fallout to be? Uh? Well,

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Speaker 1: the answer on that is almost certainly yes, because he

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Speaker 1: said as part of the election that yes, he would

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Speaker 1: the hike the tax as has been all ready legislated,

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Speaker 1: and so he doesn't. If he does nothing, and that

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Speaker 1: would be hard to redo at this point, then the

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Speaker 1: tax will go up on October one. The negative impact

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Speaker 1: of the tax, I think will be significant, but not

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Speaker 1: nearly as bad as it was in two thousand and fourteen.

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Speaker 1: At that time, they not only hid three percentage points,

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Speaker 1: but they also made a revision to the social security

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Speaker 1: system to take back some of the over indexing that

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Speaker 1: had allowed nominal pension levels to stay where they were

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Speaker 1: despite deflation in the economy. So all that took about

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Speaker 1: three percentage points out of the out of GDP. This time,

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Speaker 1: they're only doing two percentage points on the consumption tax,

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Speaker 1: and they've already passed some measures to ease the burden,

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Speaker 1: partly in some spending areas that are really necessary, like

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Speaker 1: better education things like that. So the negative impact will

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Speaker 1: probably be smaller than it was last time, but not

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Speaker 1: not tiny. So, Robbie, that's domestic policy. That's the tax hike.

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Speaker 1: Let's talk about what I don't think has got much

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Speaker 1: discussion here in the United States, the trade dispute between

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Speaker 1: Japan and South Korea. Just frame that for our listeners, Robbie,

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Speaker 1: what is going on between Japan and South Korea right now? Well,

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Speaker 1: there are a couple of things that are going on.

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Speaker 1: One is that a few months ago, the South Korean

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Speaker 1: Supreme Court made some rulings that were inconsistent with Japan's

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Speaker 1: interpretation of the treaty, and so there's been a lot

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Speaker 1: of back and forth on that. In addition, most recently,

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Speaker 1: I think was July one, Japan decided to to take

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Speaker 1: UH South Korea off the so called white list for

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Speaker 1: the export of certain dual use items. These are items

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Speaker 1: that can be used in the manufacture of nuclear weapons

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Speaker 1: um UH. Now, also we've seen from Korea a couple

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Speaker 1: of statements from diet members UH that some of these

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Speaker 1: materials over the last four years actually have been diverted

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Speaker 1: UH to or sold in non approved ways. So from

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Speaker 1: the Japanese point of view, this is an issue of

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Speaker 1: national security of great worry to the South Koreans. UH,

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Speaker 1: they don't believe this or they don't believe it. They

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Speaker 1: think it's much more oriented towards UH call it tit

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Speaker 1: for tat retaliation and might be political, etcetera. But I

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Speaker 1: think there are two issues here. One is that those

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Speaker 1: of us, you know, regular working stuffs like us, don't

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Speaker 1: understand the chemistry of what's going on, the difference between

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Speaker 1: an extraordinarily good quality of this sort of material and

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Speaker 1: a pretty good quality apparently like night and day. So

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Speaker 1: that's one issue. And then there's probably some information that

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Speaker 1: most of us don't have, like what happened to those

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Speaker 1: exports that kind of got out of hand? Why did

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Speaker 1: it happen? Are the matters? Are the methods that these

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Speaker 1: companies have to control experts? Are they actually sufficient? Moreover,

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Speaker 1: when you think about those things, there is a huge

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Speaker 1: incentive among the Security Committee not to let information go

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Speaker 1: public because if they do, then some of those sources

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Speaker 1: might be might be compromised. So it's very difficult for

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Speaker 1: investors to really know what's going on here. Dr Felman,

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Speaker 1: Thank you so much, greatly appreciated for the Morgan Stanley

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Speaker 1: m U f G in a Tokyo. We are thrilled

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Speaker 1: to bring you know Peter Hooper, who is a Deutsche

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Speaker 1: Bank They're global head of economic research. Really just set

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Speaker 1: the tone here. Dr Hooper, thank you so much for

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Speaker 1: being with us. I love your headline off your note.

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Speaker 1: Will the first cut be the deepest? And this goes

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Speaker 1: to almost the inertial impact of a rate cut cycle.

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Speaker 1: Is it biggest early on or is it bigger is

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Speaker 1: you add on rate cuts forward? Good morning tom um.

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Speaker 1: You know, certainly the debate has been um uh whether

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Speaker 1: whether to go big upfront, fifty and done, or or

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Speaker 1: make it a little smaller and uh cuts over time.

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Speaker 1: We we are still expecting several cuts this year. We

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Speaker 1: think we'll get a total of seventy five basis points.

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Speaker 1: That that does assume that things get a bit worse

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Speaker 1: on the trade front and uncertainties continue there. But it

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Speaker 1: certainly is not It is not a picture that says

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Speaker 1: you need to be aggressive up front. We don't agree

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Speaker 1: with that one. I mean, the economy is okay, um.

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Speaker 1: There are a number of reasons why we expect the

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Speaker 1: committee to want to cut rates um um. But but

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Speaker 1: I mean the case against fifty, I mean not cutting deep.

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Speaker 1: The committee committees, you know, committees mixed on this economy generally, Okay,

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Speaker 1: we're not too far from neutral, and cutting a lot

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Speaker 1: could overshoot. There are a number of other factors in

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Speaker 1: there we can talk about. Well, one of the factors

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Speaker 1: to me is the reaction functions. Since we're at the

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Speaker 1: lower bound. I mean, I know, everybody wanders back to

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Speaker 1: you know, everybody's got their analog they like to look at.

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Speaker 1: But those analogs aren't with negative interest rates. Those analogs

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Speaker 1: aren't with near zero percent rates and certainly zero really

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Speaker 1: yield rates as well. Does does your do your dynamics

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Speaker 1: work here like they've worked before. Well, yeah, we are

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Speaker 1: close to the zero bound. We're I guess nine basis

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Speaker 1: point cuts above it. One could argue, yes, you definitely

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Speaker 1: want to go aggressively given how close we are to zero,

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Speaker 1: if there's a serious risk for the economy. We're not

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Speaker 1: in that situation. We're not at a serious ritt. We're

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Speaker 1: not at the point that would warrant doing doing a

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Speaker 1: lot extra up front right now. I think the basic

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Speaker 1: reasons for cutting rates. Now, Yes, we have some we

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Speaker 1: have some risks on the global front. Yes, we have

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Speaker 1: some uncertainty on trade. The going to continue to fester

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Speaker 1: most likely. Uh. And we have an inflation picture that's

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Speaker 1: a little on the weak side, and I think the

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Speaker 1: Fed wouldn't mind seeing inflation move a bit above two.

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Speaker 1: So so the risk to to going further below neutral,

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Speaker 1: if you will, are not high. But it's not a

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Speaker 1: case of hey, we're we're on the cusp of a

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Speaker 1: downturn here, we need to act aggressively. That just isn't

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Speaker 1: the picture right now. Paid a lot of pressure from

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Speaker 1: the President this morning through Twitter on the FEDA reserve

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Speaker 1: needing to act. Does that complicate things just optically month end?

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Speaker 1: You know, you know it? It does? I think. Um,

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Speaker 1: the Fed, I mean left to its own devices. If if,

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Speaker 1: if we didn't have the mixed economic picture and everything else,

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Speaker 1: I mean the Fed, the Fed is going to move

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Speaker 1: policy based on where it sees the economy. Um. If

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Speaker 1: the economy we're not in the picture. Uh. Pressure from

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Speaker 1: the administration of anything I think is counterproductive. The FED

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Speaker 1: does not like the impression that it seems to be growing,

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Speaker 1: that the monetary policies being run out of the White House. Uh, this,

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Speaker 1: this is counterproductive, I think, and it well one factor

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Speaker 1: that to my mind argues against fifty. You don't want

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Speaker 1: to act aggressively because says, okay, the Feds jumping when

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Speaker 1: the way that jumped, and that that's that's that's bad

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Speaker 1: for perceptions about independence. Peter. One final question the idea

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Speaker 1: of how business will react to the first second, the

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Speaker 1: third rate cut. I mean, do they act or are

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Speaker 1: we at a point where they don't change investment plans

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Speaker 1: off of more accommodative policy. Well, I guess you know

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Speaker 1: at this point basis point cut is doing at least

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Speaker 1: something to to bolster financial conditions. Um. Yes, if you

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Speaker 1: wanted to really give financial conditions a boost near term,

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Speaker 1: you might want to argue doing more than more than

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Speaker 1: the market expects. But I think we're we're a bit

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Speaker 1: below neutral. I think everybody every little bit helps in

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Speaker 1: terms of supporting financial financial conditions. Um. But the bigger,

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Speaker 1: the bigger issue is what's what's going to be happening.

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Speaker 1: The trade policy for that is the main drag, that

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Speaker 1: is the main factor holding back business right now. We've

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Speaker 1: got to leave it there, Peter, Hooper, Thank you so

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Speaker 1: much for the briefing out of all of economic research

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Speaker 1: at Deutsche Bank this morning and with us now Brookes

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Speaker 1: Sutherland joining us on the industrial space as they call it,

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Speaker 1: this will be a two hour conversation right now, two

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Speaker 1: hour conversation on industry. It's oh the rage right now.

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Speaker 1: All sorts of smart people are in the value in

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Speaker 1: the the trade manufacturing gloom gloominess of industrial. Who's gonna

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Speaker 1: win this battle? The earnings are terrible, crew or those

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Speaker 1: that are buying deep discount value. I don't really know

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Speaker 1: where the deep discount value is at this point. I mean,

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Speaker 1: I think one of the things that's interesting to me

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Speaker 1: is just how much some of these industrial stocks are

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Speaker 1: up going into earning season. And I think that's why

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Speaker 1: you saw really big disappointments at the likes of CSX.

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Speaker 1: I mean that stock was up going into earnings, and

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Speaker 1: then when you have them come out and drastically cut

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Speaker 1: their record about honey well, I mean, honey well, the

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Speaker 1: gloom there you wrote about the gloom. I'm looking at

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Speaker 1: it as you beautifully stayed as you always do, Brooke.

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Speaker 1: They lifted organic revenue sales vision. That's not gloomy, is it?

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Speaker 1: So the thing about that, so they did raise their

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Speaker 1: organic revenue guidance for the full year, but the second

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Speaker 1: quarter actually came in way weaker than analysts. I'm not

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Speaker 1: buying it for ninety days. I'm buying it for one year,

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Speaker 1: two year, five years, twenty years. So the thing I understand.

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Speaker 1: The thing it gives me pause about Honeywell is people

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Speaker 1: typically think that they are just being conservative and there's

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Speaker 1: upside to their guidance and they have the opportunity to

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Speaker 1: raise down the road. And this to me does not

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Speaker 1: feel like they're trying to set the bar low so

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Speaker 1: that they can beat it. It It feels like they have

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Speaker 1: legitimate reason to be concerned to be cautious here sixty

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Speaker 1: Honeywell's business is shorter cycle, so they don't really have

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Speaker 1: that much visibility to how well it's going to turn.

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Speaker 1: Um sound like a cell side analyst. I'm just trying

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Speaker 1: to be, you know, properly this morning, get us all

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Speaker 1: in trouble. So so when it was honey was like

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Speaker 1: a twenty times earnings whatever. I'm not even going to

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Speaker 1: mention the name of the company. It's a vanilla um,

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Speaker 1: it's a vanilla industrial company. Good morning, Cleveland, Ohio, and

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Speaker 1: they're trading it like fourteen times earning. Are people comfortable

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Speaker 1: on this stuff just because it's cheap. I mean, I

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Speaker 1: think it depends on the name. I think aerospace is

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Speaker 1: still a really safe place right now. I think you

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Speaker 1: saw that with Honeywell eleven organic sales growth in their

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Speaker 1: aerospace business. I think we're going to get numbers tomorrow

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Speaker 1: from the United Technologies. They're going to reflect similar growth

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Speaker 1: there in their aerospace business, and I think that gives

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Speaker 1: people confidence um in that sector continuing to be robust

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Speaker 1: for the time being. But you look elsewhere, particularly at

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Speaker 1: some of the shorter cycle markets, you just see you know,

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Speaker 1: ground swells of weakness there, and I think that should

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Speaker 1: make you nervous and make you feel like maybe some

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Speaker 1: of these stocks are not quite cheap enough, especially if

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Speaker 1: I think about three M, which is also reporting later

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Speaker 1: this week, and I think, you know, expectations there are

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Speaker 1: that we could see yet another guidance cut, which would

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Speaker 1: bring us, by my account, I think, to five in

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Speaker 1: the past year, which would be you know, a rough

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Speaker 1: start for that new management team. I mean, I look

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Speaker 1: at three M as a separate beast in itself. What

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Speaker 1: a difference in relative performance versus other industries. It's really

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Speaker 1: rolled over there from two thousand and eighteen early as well.

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Speaker 1: Let's go back to the railroads, you know, the transports.

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Speaker 1: I've had more doubt theory conversations I think in the

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Speaker 1: last ten years. I've in the last week and a

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Speaker 1: half c Sex as an example, the airlines. I guess

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Speaker 1: this bundled ugly thing called transports is that the transports

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Speaker 1: of of of my mother and your grandmother. No, I mean,

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Speaker 1: I think it's interesting. I think you're right you think

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Speaker 1: of this as a very sort of old school industry,

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Speaker 1: but it can be a linking indicator for for where

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Speaker 1: we're going, just you know, in terms of measuring demand.

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Speaker 1: And Bloomberg News came and Creees actually did a really

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Speaker 1: interesting last week where he compared the Transport index to

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Speaker 1: FedEx and so FedEx has obviously that it's share of issues,

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Speaker 1: and but it's also exposed to international markets, so it

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Speaker 1: can be sort of a proxy for the trade war

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Speaker 1: versus railroads, you know, just by nature of their business

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Speaker 1: are more domestically focused. So if you start to see

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Speaker 1: the railroad sell off, that could be an indicator that

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Speaker 1: you know, what, the domestic economy is starting to loose steam,

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Speaker 1: that maybe we're starting to see this weakness spread into America.

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Speaker 1: So it's sort of an interesting proxy for the what's

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Speaker 1: the correlation of railroad prices right now to trade war Trump?

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Speaker 1: You know, the whole thing not very much because they're

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Speaker 1: so domestically focused. I mean, to the extent that the

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Speaker 1: automakers are struggling because of the trade tensions huge A

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Speaker 1: huge part of the railways business is moving the cars,

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Speaker 1: and so that's been weak for them. Um, you know, lately,

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Speaker 1: they've struggled a lot on the intermodal front, and intermodal

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Speaker 1: is sort of your typical consumer goods that can be

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Speaker 1: transported via either truck or rail. So part of that's

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Speaker 1: the trade war. But the other part is that the

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Speaker 1: trucking market is weak right now. The prices are down,

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Speaker 1: there's a lot of capacity there and so they're starting

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Speaker 1: to see some of the pain points there. But you know,

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Speaker 1: they sort of last a lot longer than names like

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Speaker 1: FedEx Um in terms of volume staying up. But the

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Speaker 1: other saving grace for them is they've all been under

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Speaker 1: these easy efficiency cost cutting plants, so their margins are

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Speaker 1: going up even though volumes are coming down. So what's

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Speaker 1: your focus into this this earning season. I mean, which

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Speaker 1: company is sort of the Brooks Southerland one. I've really

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Speaker 1: got to dive through well ge always, but they're industrial yeah,

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Speaker 1: oh yeah, I mean at this point they've gotten rid

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Speaker 1: of all the consumer facing businesses, really wound down the

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Speaker 1: finance arm um. You know, I don't know if that

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Speaker 1: so much as a is a key, you know, indicator

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Speaker 1: of where the markets are going. But I will say

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Speaker 1: that company, more than anything, is very vulnerable to swings

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Speaker 1: and interest rates, just given the size of their unfunded

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Speaker 1: pension liability and then their long term care insurance balance. Um,

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Speaker 1: those are very sensitive to steps down in interest rates.

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Speaker 1: And now we've got one more question for Brooks Southerland.

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Speaker 1: Of course we have to do this, which is she

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Speaker 1: is our surveillance movie mean, scarlet food is our celebrity

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Speaker 1: Loadstone Brooke could never touched scarlet foods and cyclopedic knowledge

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Speaker 1: of Hollywood, but you didn't go right there on movies

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Speaker 1: anytime you were you were one of the one eighty

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Speaker 1: three million dollars in Lion King this weekend. I was report.

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Speaker 1: You know, I have to say, it sort of lacks

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Speaker 1: something for me. I don't know if it really added

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Speaker 1: value to do the c g I lions. I just

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Speaker 1: maybe I'm too old school. I liked the old cartoon version.

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Speaker 1: You can see more emotion with the cartoon animals than

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Speaker 1: you can realistic looking lions, if that makes sense. But

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Speaker 1: they did have a c at the movie theater. Selling

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Speaker 1: point was scars suitably scarry. No, it was much more

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Speaker 1: faded it was. I mean, it took me a while

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Speaker 1: before I even found the scar on his face, and

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Speaker 1: it was it was more Was he a more modern

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Speaker 1: sensitive scar now the classic cartoon? No, it was still

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Speaker 1: just as Um. There's a lot of violence, a lot

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Speaker 1: of regicide and um, I don't know what the word

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Speaker 1: is for uncle's side, but that is uncle's side. You

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Speaker 1: just the basic ideas anyone with a with a dog

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Speaker 1: at home. I was lifting them up this weekend doing

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Speaker 1: this Simba routine. I mean, you know, the torture of

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Speaker 1: dogs at vet Bill hated it all weekend. We're doing

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Speaker 1: a Simba routine with Vett Bill all weekend. You know.

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Speaker 1: But dude, well, it's just like three star, four star,

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Speaker 1: five star. I would give it sold three and a

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Speaker 1: half that experience. It was fun, take me back to

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Speaker 1: my childhood. And the air conditioning was good, the popcorn

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Speaker 1: was good. Yeah, what wait a minute, what the popcorn cost?

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Speaker 1: It was a lot. It's a lot. And it also

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Speaker 1: comes in this like industrial size that basically like you

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Speaker 1: could feed a family of six. So thank you so

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Speaker 1: much on Industrial America with lots coming up UM as well,

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Speaker 1: this is a wonderful moment for me. Jonathan porteris as

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Speaker 1: a King's College, and I can tell you that in

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Speaker 1: all my conversations in the United Kingdom on the oddity

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Speaker 1: of the constitutional ballet of a disunited Kingdom, he has

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Speaker 1: been hugely valuable. Professor Porters joins us now from King's College.

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Speaker 1: Your mathematics at Oxford maybe prepared you for this moment. Professor,

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Speaker 1: what is the mathod? What is boris Johnson's mathematics? When

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Speaker 1: he becomes prime Minister Johnson? What is his calculus? Um?

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Speaker 1: So the big question is that Jonasan could really go

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Speaker 1: one of two ways. UM. The first is to UH

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Speaker 1: is to say that um a no deal breaksit would

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Speaker 1: be bad for the UK economy and perhaps more importantly,

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Speaker 1: from his point of view, bad for him politically. Um,

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Speaker 1: and that therefore he needs a deal with the EU. UM.

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Speaker 1: And that essentially means the deal that is already on

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Speaker 1: the table, the deal that Theresa May has negotiated, possibly rebadged. UM.

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Speaker 1: I think what UH in American politics is referred to

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Speaker 1: as putting lipstick on the pig UH and then UH

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Speaker 1: and then trying to sell that to the UK Parliament

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Speaker 1: and then to the to the British people. So he

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Speaker 1: could go that way. UM. The alternative is to for

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Speaker 1: him to say, as he has done in the campaign,

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Speaker 1: that Theresa May's deal is dead UM, and that if

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Speaker 1: the EU want a deal, they're gonna have to throw

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Speaker 1: it out and start again. You have said that's not

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Speaker 1: going to happen. UM. If he goes down that route,

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Speaker 1: and that seems to me the most likely one, then

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Speaker 1: the most likely outcome is that we are headed for

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Speaker 1: no deal, that the UK Parliament will stop him from

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Speaker 1: going to no deal, and that we will have to

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Speaker 1: have an election to sort it out. So that obviously

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Speaker 1: is a very high risk gamble from Mr Johnson to take,

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Speaker 1: but it is really the logical consequences so far. Now.

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Speaker 1: Mr Johnson is no stranger to changing his mind when

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Speaker 1: he decides it it suits him. Um, I don't think

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Speaker 1: anyone would describe him as the most principal politician in

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Speaker 1: in UK politics, so he's quite capable of doing a

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Speaker 1: U turn. But at the moment, the logic point to

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Speaker 1: US heading for no deal UM, and US having a

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Speaker 1: general election relatively soon within the next six months to

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Speaker 1: to decide whether or not that's through it we want

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Speaker 1: to go. So, Jonathan, is there any sense yet it's

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Speaker 1: been you know, several years now of what a hard

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Speaker 1: Brexit really would look like for the UK. Um. Well,

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Speaker 1: I think we have a much better idea now than

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Speaker 1: than we did about what a hard break it would

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Speaker 1: look like. And we know that some of the worst

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Speaker 1: potential impacts of a hard break of a no deal

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Speaker 1: Brexit will not materialize. So UM. In technical terms, if

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Speaker 1: nothing at all had been done, then planes would stop

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Speaker 1: flying between the UK and continental Europe for example. That's

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Speaker 1: not going to happen. Uh. There are some legal fixes

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Speaker 1: that the EU has put in place UNI laterally to

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Speaker 1: ensure that planes will keep on flying, UH, trucks will

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Speaker 1: keep on rolling UM. And on the UK side, we've

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Speaker 1: made contingency plans so we can avoid things like shortages

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Speaker 1: of medicine and so on. So I don't think the

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Speaker 1: idea that, as was technically possible at one point, that

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Speaker 1: that what the the UK would literally be cut off

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Speaker 1: from the continent and that there would be a quick

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Speaker 1: descent into chaos with widespread shortages. I don't think that

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Speaker 1: is very likely. But there will be significant economic disruption

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Speaker 1: because the one thing No Deal clearly does mean legally

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Speaker 1: is new tariffs, trade barriers and custom controls bete queen

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Speaker 1: the UK and continental Europe UM and given the degree

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Speaker 1: to which multinational companies have um European ied their supply

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Speaker 1: chains over the last forty years, relying on the complete

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Speaker 1: absence of any such borders or controls, that is going

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Speaker 1: to be pretty disruptive. So you'd expect to see rises

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Speaker 1: in prices, probably a fall in the pound, um, possibly

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Speaker 1: some localized disruption and shortages of some things. Although I

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Speaker 1: don't think it will be as bad as some people

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Speaker 1: claim we do, but it will not be. It will

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Speaker 1: be bumpy, it will be disruptive. So, Jonathan, I know

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Speaker 1: in your list of potential outcomes here you did not

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Speaker 1: mention my favorite, which is the second referendum. Is that

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Speaker 1: as there are no momentum behind a second referendum. Um.

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Speaker 1: I I think that the second referendum is a certainly

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Speaker 1: a possibility, but we're not We're not We're not there yet. Um,

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Speaker 1: it is possible, I think, I do not think the

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Speaker 1: there is. Some people have suggested that Boris Johnson would

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Speaker 1: indeed do a complete cynical U turn and decided the

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Speaker 1: best way out of this bind in which he'll find

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Speaker 1: himself in is a second referendum. I think that's unlikely.

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Speaker 1: I think it would be politically suicidal for him. But

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Speaker 1: one possible outcome of the election that I've suggested is likely.

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Speaker 1: If there is an election, it will be between parties

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Speaker 1: on the one side and the Conservative Party led to

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Speaker 1: Boris Johnson and then breaksit Party led by Nigel Farrens

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Speaker 1: who want a quick no deal Brexit, and parties on

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Speaker 1: the other side, the Liberal Democrats and Labor who are

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Speaker 1: broadly going to be committed for a second referendum. That

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Speaker 1: election is very unpredictable, but if it goes one way,

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Speaker 1: then you could have a second referendum. So the second

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Speaker 1: referendum is certainly on the agenda in a way which

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Speaker 1: it wasn't a year ago. Is the nation exhausted by this.

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Speaker 1: Do they look at this as a tipping point where

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Speaker 1: Prime Minister Johnson will come to the rest? You will,

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Speaker 1: Larry the Captain, Life will go on And are we

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Speaker 1: at a tipping point of a constitutional crisis? Um? I will.

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Speaker 1: There is certainly a very widespread mood that we are

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Speaker 1: that Brexit has been a complete mess. The government has

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Speaker 1: made a complete mess of it, and everyone wishes your

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Speaker 1: a large proportion population are very bored with it and

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Speaker 1: wish it would somehow go away, uh, and that they

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Speaker 1: could forget about it. The problem, and this is why

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Speaker 1: it's such an interractible problem, is that none of the

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Speaker 1: options on the table we'll make Brexit go away. The idea,

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Speaker 1: the attraction for some people of a no deal Brexit

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Speaker 1: is well, okay, then we'll be out, it will be sorted,

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Speaker 1: We'll have this clean Brexit. But the fact is it

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Speaker 1: won't because there will be all sorts of things. It

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Speaker 1: isevitably we will end up back at the negotiating table

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Speaker 1: with the EU trying to work out what to do

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Speaker 1: about all the resolved issues about tray, about transport, about

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Speaker 1: exit bill, about citizens and so on. Equally, even if

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Speaker 1: there is a second referendum. Uh, that's not going to

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Speaker 1: bring back the country back together either. And there is

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Speaker 1: a very large sports of population we will see that

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Speaker 1: is a betrayal and overturning the first reverendum undemocratic and

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Speaker 1: so on. So unfortunately, well, I think there is a

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Speaker 1: very large portions of population will like one way or another,

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Speaker 1: rate it to be over with. It's not going to

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Speaker 1: happen no scenario under which we don't continue to be

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Speaker 1: talking about. It'll keep us, it'll keep us employed. We

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Speaker 1: look forward to seeing you in the green at Westminster again.

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Speaker 1: Jonathan Portis at King's College, thank you so much for

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Speaker 1: perspective away that that's the best word intractive. Yeah, And

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Speaker 1: of all the people I run into there, he's the

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Speaker 1: clearest speaking about the permanence of this, which I find fascinating. Yeah. Yeah,

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Speaker 1: I think, you know, as he mentioned, there may be

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Speaker 1: you know, another election here that we needed to sort

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Speaker 1: this out. Thanks for listening to the Bloomberg Surveillance podcast.

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Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

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Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom

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Speaker 1: Keane Before the podcast, you can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio,