1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:33,960 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Big 5 00:00:34,000 --> 00:00:36,840 Speaker 1: week of Central Bank decisions with President Donald Trump casting 6 00:00:36,840 --> 00:00:39,720 Speaker 1: a long political shadow over this week's meeting of the 7 00:00:39,760 --> 00:00:42,800 Speaker 1: Federal Reserve in more ways than one. Joining me to 8 00:00:42,800 --> 00:00:46,120 Speaker 1: discuss this Bruce Chasma, JP Morgan, chief economist and managing 9 00:00:46,159 --> 00:00:48,479 Speaker 1: director of Global Research, and he joins us here in 10 00:00:48,479 --> 00:00:51,480 Speaker 1: New York. Good money to Bruce. Good morning, big week, big, 11 00:00:51,479 --> 00:00:53,519 Speaker 1: big week ahead, and let's begin with the Fed. This 12 00:00:53,600 --> 00:00:57,160 Speaker 1: administration thinks we can have sustainable GDP growth of three 13 00:00:57,200 --> 00:01:01,520 Speaker 1: plus percent. The Federal Reserve says otherwise, how does that 14 00:01:01,560 --> 00:01:05,319 Speaker 1: tension materialize over the next couple of months, Well over 15 00:01:05,360 --> 00:01:07,720 Speaker 1: the next couple of months the Fed moves in September. 16 00:01:08,120 --> 00:01:10,000 Speaker 1: I'm not sure there's a lot of reason for the 17 00:01:10,000 --> 00:01:12,760 Speaker 1: administration that criticize the Fed, but maybe we continue to 18 00:01:12,800 --> 00:01:15,240 Speaker 1: get it. I think the issue for the Fed is 19 00:01:15,280 --> 00:01:18,680 Speaker 1: they're not quite yet at neutral. Uh. They see an 20 00:01:18,680 --> 00:01:21,440 Speaker 1: economy that is gonna likely deliver growth close to three 21 00:01:21,440 --> 00:01:23,800 Speaker 1: percent over the next couple of quarters. But labor markets 22 00:01:23,880 --> 00:01:27,720 Speaker 1: keep tightening, inflation continues to drift up. It's telling them 23 00:01:27,720 --> 00:01:30,720 Speaker 1: we're growing above where the sustainable paces, and policy needs 24 00:01:30,760 --> 00:01:33,639 Speaker 1: to be more close to neutral. Did you see anything 25 00:01:33,640 --> 00:01:35,720 Speaker 1: in fridayce print that gives you confidence that this could 26 00:01:35,760 --> 00:01:39,160 Speaker 1: be sustainable? Um? Well, I think in the short term yes, 27 00:01:39,319 --> 00:01:41,920 Speaker 1: because you have an economy which, yes, that number was 28 00:01:42,000 --> 00:01:44,560 Speaker 1: juiced up by a big trade contribution that's going to 29 00:01:44,640 --> 00:01:47,559 Speaker 1: go away. But we have good solid underpinnings in terms 30 00:01:47,560 --> 00:01:50,920 Speaker 1: of both business spending and household spending. The fiscal stimulus 31 00:01:51,000 --> 00:01:53,160 Speaker 1: is still kicking in. And boy, that was a very 32 00:01:53,160 --> 00:01:55,440 Speaker 1: weak inventory number, which sets you up nicely for the 33 00:01:55,440 --> 00:01:57,720 Speaker 1: second It really interesting that a lot of people focused 34 00:01:57,720 --> 00:01:59,960 Speaker 1: on the contribution from trite, but the contribution of try 35 00:02:00,040 --> 00:02:02,920 Speaker 1: it was offset from inventories. Yeah, so I think in 36 00:02:02,920 --> 00:02:05,680 Speaker 1: the second half you lose the trade and you gain 37 00:02:05,760 --> 00:02:07,920 Speaker 1: the inventories, and there's a there's a little bit of 38 00:02:07,920 --> 00:02:10,919 Speaker 1: a negative probably on balance there, but not a big negative. 39 00:02:11,240 --> 00:02:13,080 Speaker 1: So we think the third quarter is going to be 40 00:02:13,120 --> 00:02:14,840 Speaker 1: something like three and a half, which isn't a big 41 00:02:14,880 --> 00:02:17,120 Speaker 1: step down and we think the second half is probably 42 00:02:17,160 --> 00:02:20,000 Speaker 1: gonna average at least three percent. So we're still doing well. 43 00:02:20,360 --> 00:02:22,080 Speaker 1: But we're doing well, and we're gonna have a tightening 44 00:02:22,160 --> 00:02:24,320 Speaker 1: labor market. One thing we haven't mentioned is we've got 45 00:02:24,360 --> 00:02:26,640 Speaker 1: an employment report this week, and we think we're going 46 00:02:26,680 --> 00:02:29,040 Speaker 1: to get another two thousand gain, a dip in the 47 00:02:29,120 --> 00:02:31,760 Speaker 1: unemployment rate. I think what's interesting is we're not seeing 48 00:02:31,760 --> 00:02:34,639 Speaker 1: wage pressures build very rapidly, but I think there is 49 00:02:34,680 --> 00:02:38,040 Speaker 1: a sign that underneath the surface labor bargaining power starting 50 00:02:38,040 --> 00:02:40,040 Speaker 1: to firm here. What it also fun interesting is that 51 00:02:40,080 --> 00:02:42,880 Speaker 1: that's a renewed focused on the participation right started to 52 00:02:42,919 --> 00:02:46,560 Speaker 1: creep higher, and whether this administration starts to communicate towards 53 00:02:46,560 --> 00:02:49,240 Speaker 1: the federal Reserve, perhaps with even more sort of conviction 54 00:02:49,320 --> 00:02:51,880 Speaker 1: that hey, guys, white, look, the way you're thinking about 55 00:02:51,880 --> 00:02:53,840 Speaker 1: the labor market of the last five years is dead wrong. 56 00:02:53,880 --> 00:02:56,600 Speaker 1: Because people are started to come back in well, people 57 00:02:56,639 --> 00:02:59,400 Speaker 1: have and the prime age participation rate has moved up. 58 00:02:59,440 --> 00:03:02,640 Speaker 1: But if you get the noise around month to month data, 59 00:03:02,880 --> 00:03:06,040 Speaker 1: the participation rate has done nothing but stay stable here. 60 00:03:06,720 --> 00:03:08,280 Speaker 1: And I think the basic point here is there are 61 00:03:08,280 --> 00:03:10,360 Speaker 1: too many people like me in the workforce. The baby 62 00:03:10,400 --> 00:03:13,919 Speaker 1: boomers who are gradually starting to move into retirement age, 63 00:03:14,400 --> 00:03:17,480 Speaker 1: and that's off setting the benefits of bringing those workers back. 64 00:03:18,040 --> 00:03:22,480 Speaker 1: Well within that is the labor participation rate and some 65 00:03:22,639 --> 00:03:25,560 Speaker 1: of these other dynamics, and it goes. I don't know 66 00:03:25,560 --> 00:03:27,600 Speaker 1: if John gets this mail, John gets a lot more 67 00:03:27,639 --> 00:03:30,320 Speaker 1: mail on um, you know, World Cup and all that. 68 00:03:30,760 --> 00:03:33,760 Speaker 1: I get mail that says when Bruce Casman says the 69 00:03:33,800 --> 00:03:38,080 Speaker 1: economy is great and we're fully employed, no one believes it. 70 00:03:38,760 --> 00:03:41,120 Speaker 1: And you know, Washington Post had a whole series of 71 00:03:41,200 --> 00:03:44,760 Speaker 1: charts a week ago, you know, from Bloomberg that underscored 72 00:03:44,800 --> 00:03:47,560 Speaker 1: that are we fully employed? Well, I think we have 73 00:03:47,600 --> 00:03:50,000 Speaker 1: to be careful what we mean by fully employed. Fully 74 00:03:50,000 --> 00:03:53,200 Speaker 1: employed doesn't mean that we can attract more people to 75 00:03:53,240 --> 00:03:55,760 Speaker 1: come into the workforce. What it does mean is in 76 00:03:55,920 --> 00:03:58,440 Speaker 1: order to do so, you have to incentivize them more 77 00:03:58,760 --> 00:04:02,920 Speaker 1: by paying them a higher way age. Isn't that happening? Well, 78 00:04:03,000 --> 00:04:07,160 Speaker 1: it's happening, but very modestly. I think the question around 79 00:04:07,160 --> 00:04:09,400 Speaker 1: that is how much of it is due to bad things, 80 00:04:09,440 --> 00:04:13,040 Speaker 1: which is that labor bargaining power just structurally weak, and 81 00:04:13,080 --> 00:04:15,360 Speaker 1: how much of its productivity weakness, which has been a 82 00:04:15,880 --> 00:04:18,320 Speaker 1: key theme in the economy and how much of it 83 00:04:18,360 --> 00:04:20,040 Speaker 1: is just that the pressures of brewing here and we're 84 00:04:20,040 --> 00:04:22,719 Speaker 1: gonna start to see it reflected it It takes time. 85 00:04:22,760 --> 00:04:26,320 Speaker 1: Maybe the unemployment rate can get into the high threes 86 00:04:26,400 --> 00:04:29,320 Speaker 1: before we start to see that pressure build. Um. I 87 00:04:29,320 --> 00:04:31,000 Speaker 1: think there's a lot to debate on that, but I 88 00:04:31,040 --> 00:04:33,240 Speaker 1: think I think there's no doubt that somewhere between a 89 00:04:33,240 --> 00:04:35,839 Speaker 1: four percent unemployment rate and zero we're gonna have problems. 90 00:04:36,040 --> 00:04:37,560 Speaker 1: And I think there's no doubt that at a three 91 00:04:37,560 --> 00:04:39,960 Speaker 1: percent growth rate, the unemployer rate is going to keep falling. 92 00:04:40,000 --> 00:04:43,760 Speaker 1: John nailed the savings. To me, the biggest deal was 93 00:04:43,800 --> 00:04:46,960 Speaker 1: the revision of savings. Was that a gain to the elite. 94 00:04:47,520 --> 00:04:50,919 Speaker 1: Did the savings charts swing up to more savings in 95 00:04:50,960 --> 00:04:55,320 Speaker 1: America just because of a statement that the rich got richer? Um? 96 00:04:55,920 --> 00:04:58,520 Speaker 1: I think the savings rate, by the way, is one 97 00:04:58,520 --> 00:05:02,000 Speaker 1: of the worst measured pieces of economic news. The average 98 00:05:02,000 --> 00:05:03,960 Speaker 1: revision to the u S savings rate over the last 99 00:05:03,960 --> 00:05:06,800 Speaker 1: thirty years has been from the first print to where 100 00:05:06,839 --> 00:05:09,479 Speaker 1: we are now is four percentage points. So anytime we 101 00:05:09,480 --> 00:05:11,800 Speaker 1: have a conversation about the savings rate, we should realize 102 00:05:11,800 --> 00:05:14,960 Speaker 1: it's poorly measured. Yes, we had a lot of proprietary 103 00:05:15,000 --> 00:05:18,240 Speaker 1: income of people who are working self employees. You may 104 00:05:18,520 --> 00:05:21,120 Speaker 1: you can debate where that shows up on the distribution 105 00:05:21,160 --> 00:05:23,880 Speaker 1: of income um, but I think the basic point is 106 00:05:23,960 --> 00:05:26,480 Speaker 1: do not have a debate. I think in any short 107 00:05:26,600 --> 00:05:29,320 Speaker 1: term horizon over the savings rate level telling you something 108 00:05:29,360 --> 00:05:32,200 Speaker 1: about where households are for what it's worth. The revision 109 00:05:32,240 --> 00:05:35,040 Speaker 1: does suggest there's more fuel in the tank for households, 110 00:05:35,040 --> 00:05:37,880 Speaker 1: and I think we are seeing household behavior uh look 111 00:05:37,960 --> 00:05:39,919 Speaker 1: better today than it was over the most of the 112 00:05:39,960 --> 00:05:42,920 Speaker 1: past expansion where some of that saving was built up. 113 00:05:43,160 --> 00:05:45,320 Speaker 1: Caught up with a series of sources of mind on 114 00:05:45,360 --> 00:05:47,360 Speaker 1: the buy side on Friday and asked them just a 115 00:05:47,480 --> 00:05:49,560 Speaker 1: very basic question. If I offered you the outcome of 116 00:05:49,560 --> 00:05:51,599 Speaker 1: even the Federal Reserve meeting this week or the Bank 117 00:05:51,600 --> 00:05:53,680 Speaker 1: of Japan meeting this week, which one would you like, 118 00:05:53,800 --> 00:05:56,039 Speaker 1: right here, right now on Friday? And they all said 119 00:05:56,080 --> 00:05:58,360 Speaker 1: to me the Bank of Japan. Obviously the focus seems 120 00:05:58,360 --> 00:06:00,719 Speaker 1: to be the b J overn. What are you looking 121 00:06:00,800 --> 00:06:02,640 Speaker 1: forth from the Bank of japanas we gotta sleep in 122 00:06:02,640 --> 00:06:04,520 Speaker 1: New York and wake up tomorrow. Well, I think part 123 00:06:04,520 --> 00:06:06,080 Speaker 1: of it is if we don't quite know what the 124 00:06:06,120 --> 00:06:07,360 Speaker 1: bo J is going to do. The b o J 125 00:06:07,600 --> 00:06:10,400 Speaker 1: has attention the Fed doesn't have right now. Uh, the 126 00:06:10,400 --> 00:06:12,560 Speaker 1: b o J is not hitting its inflation target. The 127 00:06:12,680 --> 00:06:16,320 Speaker 1: last inflation report was actually very disappointing, So there's every 128 00:06:16,360 --> 00:06:18,000 Speaker 1: reason for them to hold the line. In fact, you 129 00:06:18,000 --> 00:06:20,480 Speaker 1: could argue they should be doing more, but they're sitting 130 00:06:20,520 --> 00:06:23,440 Speaker 1: there watching the flatness of the curve a road bank 131 00:06:23,480 --> 00:06:26,200 Speaker 1: profitability and they're not happy about that. So there's a 132 00:06:26,200 --> 00:06:30,039 Speaker 1: at tension here between financial stability and macroeconomic objectives, and 133 00:06:30,120 --> 00:06:33,920 Speaker 1: certainly the the newsflow has suggested that that is going 134 00:06:33,960 --> 00:06:36,400 Speaker 1: to actually get them to give us a rise in 135 00:06:36,440 --> 00:06:40,000 Speaker 1: the yield control target with a doversh signal about forward guidance. 136 00:06:40,040 --> 00:06:42,360 Speaker 1: Somewhat strange then that they've stepped in three times after 137 00:06:42,360 --> 00:06:45,240 Speaker 1: the last week to cap yields. Can you reconcile that 138 00:06:45,279 --> 00:06:48,080 Speaker 1: with a shift overnight? Because I struggled to well, I 139 00:06:48,080 --> 00:06:50,520 Speaker 1: think I think part of the issue here is that 140 00:06:50,560 --> 00:06:54,040 Speaker 1: when you're dealing with a control tenure yield, any time 141 00:06:54,120 --> 00:06:56,720 Speaker 1: you want to signal changes, even if they are very 142 00:06:56,720 --> 00:06:59,279 Speaker 1: small changes, you have a really hard time controlling in 143 00:06:59,279 --> 00:07:01,320 Speaker 1: the market. And I think they're doing that. They haven't 144 00:07:01,320 --> 00:07:03,719 Speaker 1: made the change, yet yields have already moved up to 145 00:07:03,760 --> 00:07:06,640 Speaker 1: ten basis points. Their target is zero at the current point. 146 00:07:06,680 --> 00:07:09,120 Speaker 1: If they don't come in and uh stabilize that, they're 147 00:07:09,120 --> 00:07:11,680 Speaker 1: gonna have a much bigger problem. First, thank you so much, 148 00:07:11,800 --> 00:07:16,200 Speaker 1: greatly greatly appreciated. First Castell with JP Morgan with I 149 00:07:16,200 --> 00:07:18,120 Speaker 1: think some optims what I heard there, we didn't talk 150 00:07:18,160 --> 00:07:21,239 Speaker 1: about it here about on television earlier was the fiscal 151 00:07:21,320 --> 00:07:26,640 Speaker 1: stimulus coming along with a half percent calculation by his 152 00:07:27,360 --> 00:07:44,280 Speaker 1: shop Leslie Benjamurra with his chadow mouse, Leslie, this is 153 00:07:44,320 --> 00:07:47,800 Speaker 1: all below the radar. The leader of Italy and controversial 154 00:07:47,880 --> 00:07:51,360 Speaker 1: is going to visit with the president. What will occur? Well, 155 00:07:51,400 --> 00:07:54,600 Speaker 1: I think you know, this is been Trump recognizing that 156 00:07:54,640 --> 00:07:56,560 Speaker 1: this is a leader who backed him at the G 157 00:07:56,680 --> 00:07:59,000 Speaker 1: seven when he said we need to invite Russians in. 158 00:07:59,120 --> 00:08:02,160 Speaker 1: Who's you know looking uh, you know, for Conte, this 159 00:08:02,280 --> 00:08:06,160 Speaker 1: is wonderful for his position domestically. So I think, you know, 160 00:08:06,240 --> 00:08:08,920 Speaker 1: the affirmation of it of an ally, of a partner, 161 00:08:08,960 --> 00:08:12,640 Speaker 1: of a friendly, friendly voice in Europe at a time 162 00:08:12,640 --> 00:08:15,120 Speaker 1: when things haven't been great with Europe. But somebody who 163 00:08:15,200 --> 00:08:17,480 Speaker 1: has it takes a similarly you know, his country's taking 164 00:08:17,480 --> 00:08:20,920 Speaker 1: governments saying a similarly hard line on immigration, it's open 165 00:08:20,960 --> 00:08:23,880 Speaker 1: to Russia. Um, I think this is you know, forging 166 00:08:24,080 --> 00:08:29,040 Speaker 1: his his his populous network. And in John I should 167 00:08:29,080 --> 00:08:33,840 Speaker 1: mention this is Prime Minister Giuzeppe, well done, and this 168 00:08:33,920 --> 00:08:38,520 Speaker 1: is not the Deputy Prime Minister mcdeo Silvini. Wow, you 169 00:08:38,559 --> 00:08:44,240 Speaker 1: spent the whole weekend practical I would save me save 170 00:08:45,600 --> 00:08:50,719 Speaker 1: I can't get why not the worst? I'm gonna put 171 00:08:50,720 --> 00:08:54,760 Speaker 1: you in touch with my youngest sister who speaks beautiful, 172 00:08:54,760 --> 00:08:58,520 Speaker 1: fluent Italian. And maybe if you said a love BiblioTech 173 00:08:58,600 --> 00:09:00,840 Speaker 1: and that got me nowhere in the court. Okay, let's 174 00:09:00,880 --> 00:09:03,240 Speaker 1: be let's move on. If if you chance to Angela Merkeley, 175 00:09:03,240 --> 00:09:07,640 Speaker 1: you worried about today's mazing Oh, I think yes, I mean, 176 00:09:07,679 --> 00:09:11,000 Speaker 1: I think inevitably everybody is worried about what's happening in Italy. 177 00:09:11,040 --> 00:09:14,400 Speaker 1: It doesn't the optics of you know, the Italian PM 178 00:09:14,440 --> 00:09:17,680 Speaker 1: going across uh To to talk with Trump on the 179 00:09:17,720 --> 00:09:20,400 Speaker 1: back of those comments about Russia. You know, things of 180 00:09:20,840 --> 00:09:22,720 Speaker 1: in the short terms gotten a little bit better with 181 00:09:22,760 --> 00:09:25,959 Speaker 1: the EU on trade, but there's still this this broader conversation. 182 00:09:26,000 --> 00:09:29,520 Speaker 1: What are Trump's real objectives when it comes to Europe 183 00:09:29,520 --> 00:09:31,320 Speaker 1: and who does he feel closest to him? Right now, 184 00:09:31,400 --> 00:09:34,480 Speaker 1: it still looks like he feels closest to the wrong 185 00:09:34,520 --> 00:09:37,400 Speaker 1: part of Europe. Rachel Donadio in The Atlantic has a 186 00:09:37,480 --> 00:09:42,320 Speaker 1: really timely article Italy's voters aren't anti immigration, but their 187 00:09:42,360 --> 00:09:44,960 Speaker 1: government is. And you know, whether it's the United States 188 00:09:45,000 --> 00:09:48,560 Speaker 1: or it's Italy, that's a huge tension, leslie Vinjamuri, isn't 189 00:09:48,559 --> 00:09:51,920 Speaker 1: it between sort of the humanitarian kind of thing and 190 00:09:52,120 --> 00:09:57,320 Speaker 1: voters saying enough and governments that have taken a stand. Yeah, 191 00:09:57,320 --> 00:10:00,000 Speaker 1: but you know, voters are divided. There's of course, I'm 192 00:10:00,040 --> 00:10:02,360 Speaker 1: in the US, right, and this is an immigrant nation. 193 00:10:02,480 --> 00:10:05,720 Speaker 1: People understand and have long understood the important of immigrants 194 00:10:05,720 --> 00:10:09,560 Speaker 1: to the economy and just morally and ethically to the country, um, 195 00:10:09,640 --> 00:10:11,520 Speaker 1: to the you know, the fabric of the country. At 196 00:10:11,559 --> 00:10:14,120 Speaker 1: the same time, the rhetoric has been very powerful with 197 00:10:14,160 --> 00:10:16,760 Speaker 1: a certain segment of the population in Europe. It's powerful 198 00:10:16,760 --> 00:10:19,080 Speaker 1: on the back of you know, is Italy and effect 199 00:10:19,080 --> 00:10:22,080 Speaker 1: being a frontline state on the immigration crisis, on the 200 00:10:22,120 --> 00:10:26,040 Speaker 1: migration crisis, and in the US, um there's certainly a 201 00:10:26,360 --> 00:10:29,920 Speaker 1: very certain contingent that is that Trump is speaking to 202 00:10:30,640 --> 00:10:33,800 Speaker 1: So it's that forging, you know, at the elite level, 203 00:10:33,880 --> 00:10:38,360 Speaker 1: right Trump and Um and Conte. It's it's very it's 204 00:10:38,679 --> 00:10:40,360 Speaker 1: it is playing a certain kind of politics that you're 205 00:10:40,400 --> 00:10:42,640 Speaker 1: right to point to. But Leslie, we do often confuse 206 00:10:42,720 --> 00:10:45,800 Speaker 1: too really important issues and one is a refugee crisis 207 00:10:45,840 --> 00:10:48,280 Speaker 1: and the other is an immigration crisis. Can you just 208 00:10:48,320 --> 00:10:51,400 Speaker 1: talk me through why those are two very important distinctions 209 00:10:51,440 --> 00:10:55,760 Speaker 1: to make well, because you know, there's refugees have a 210 00:10:55,960 --> 00:10:59,640 Speaker 1: right under international law to be protected, to be given 211 00:11:00,400 --> 00:11:06,360 Speaker 1: um access and but but leaders in the current in 212 00:11:06,400 --> 00:11:09,000 Speaker 1: the current context are reluctant. You know, there's a there's 213 00:11:09,040 --> 00:11:13,720 Speaker 1: a playing on the there's a desire to kind of 214 00:11:13,720 --> 00:11:16,199 Speaker 1: talk to us about themigration crisis and not to differentiate 215 00:11:16,240 --> 00:11:19,520 Speaker 1: because the numbers are so vasked, it's complicated to differentiate. 216 00:11:19,559 --> 00:11:23,360 Speaker 1: It's not that easy to differentiate between a refugee who 217 00:11:23,400 --> 00:11:27,360 Speaker 1: has legitimate right to be protected under international law and 218 00:11:27,480 --> 00:11:30,440 Speaker 1: a migrant. So Leslie, for a lot of people and 219 00:11:30,480 --> 00:11:31,920 Speaker 1: for a lot of the electorate in a place like 220 00:11:32,000 --> 00:11:34,520 Speaker 1: Italy at the moment, they looked to the likes of 221 00:11:34,559 --> 00:11:37,800 Speaker 1: Mattea Salvini and Giuseppe Conte, who heads this government as 222 00:11:37,840 --> 00:11:39,640 Speaker 1: those that are actually a weight to the reality of 223 00:11:39,640 --> 00:11:41,440 Speaker 1: what is happening in a country like Italy on the 224 00:11:41,480 --> 00:11:44,880 Speaker 1: front line of both the refugee and immigration crisis. And 225 00:11:44,920 --> 00:11:46,920 Speaker 1: I'm just wondering, for those with a more liberal view 226 00:11:47,520 --> 00:11:50,520 Speaker 1: of the world, what is the election winning argument, how 227 00:11:50,559 --> 00:11:52,920 Speaker 1: do those individuals get into power? And what is the 228 00:11:53,000 --> 00:11:56,200 Speaker 1: argument on an issue like the refugee crisis and on 229 00:11:56,240 --> 00:11:59,800 Speaker 1: another issue like the immigration crisis that actually resonates with 230 00:11:59,880 --> 00:12:04,440 Speaker 1: the electorate. Well, I mean, I think the reality is 231 00:12:04,559 --> 00:12:06,760 Speaker 1: that it's it's an argument, but it's got to be 232 00:12:06,800 --> 00:12:09,120 Speaker 1: backed up now there. You know, it's clearly the case 233 00:12:09,160 --> 00:12:11,760 Speaker 1: that even for those who are very sympathetic to the 234 00:12:11,800 --> 00:12:15,719 Speaker 1: plight of refugees, who want to um keep keep some 235 00:12:15,760 --> 00:12:18,320 Speaker 1: sort of protection in place, there's got to still be 236 00:12:18,440 --> 00:12:22,120 Speaker 1: a very effective regime in place that can maintain borders 237 00:12:22,120 --> 00:12:25,480 Speaker 1: otherwise inevitably right, the space is open towards populace to 238 00:12:25,600 --> 00:12:29,520 Speaker 1: manipulate the the language of fear and um and are 239 00:12:29,520 --> 00:12:35,040 Speaker 1: successful in doing so so cooperation with Europe emphasizing the 240 00:12:35,080 --> 00:12:41,080 Speaker 1: importance of protecting refugees while while not denying the very 241 00:12:41,240 --> 00:12:46,120 Speaker 1: real problem of of managing and sharing uh the immigrants. 242 00:12:46,559 --> 00:12:50,640 Speaker 1: What would you call the international relations foundation of the 243 00:12:50,760 --> 00:12:54,200 Speaker 1: US right now? I mean it's not you know, is 244 00:12:54,320 --> 00:12:56,680 Speaker 1: free to would say a post American world, or maybe 245 00:12:56,720 --> 00:13:00,240 Speaker 1: it's not a clash of civilizations, Thank you, Mr Honeyton. 246 00:13:00,440 --> 00:13:06,839 Speaker 1: What is the underlying theory that drives US international relations? Well, 247 00:13:06,880 --> 00:13:09,080 Speaker 1: you know, the big debate, as you well know, Tom, 248 00:13:09,200 --> 00:13:13,040 Speaker 1: right now is whether this is just an aberration, whether 249 00:13:13,040 --> 00:13:15,800 Speaker 1: the US will get back on track and start supporting 250 00:13:15,960 --> 00:13:20,280 Speaker 1: the institutions that it has created and and supported and 251 00:13:20,320 --> 00:13:25,240 Speaker 1: short up for seventy years or more more, whether Trump 252 00:13:25,480 --> 00:13:28,880 Speaker 1: is really about Trump is m about an under underlying 253 00:13:29,080 --> 00:13:32,440 Speaker 1: social economic change, and that we're just going to see 254 00:13:32,480 --> 00:13:34,760 Speaker 1: more of this. But I think right now people are 255 00:13:34,880 --> 00:13:36,880 Speaker 1: very worried, and I'd say I would really point in 256 00:13:36,920 --> 00:13:38,920 Speaker 1: not at the last eighteen months, but really at the 257 00:13:39,000 --> 00:13:41,839 Speaker 1: last two or three months, where those who thought that 258 00:13:41,920 --> 00:13:44,400 Speaker 1: America was just going through a bad time are now 259 00:13:44,440 --> 00:13:46,280 Speaker 1: starting to think that we're in this. This is a 260 00:13:46,280 --> 00:13:49,000 Speaker 1: permanent change that the US has been in the fine 261 00:13:49,120 --> 00:13:51,640 Speaker 1: and it's and it's now saying we will no longer 262 00:13:53,200 --> 00:13:55,560 Speaker 1: and show up these institutions. We need to renegotiate our 263 00:13:55,640 --> 00:13:57,920 Speaker 1: role in the Well we mentioned the Italian leader today 264 00:13:58,000 --> 00:14:01,960 Speaker 1: visiting what on your eight calendars the next thing? Or 265 00:14:01,960 --> 00:14:04,880 Speaker 1: have you checked out until Labor Day? I mean, what's 266 00:14:04,880 --> 00:14:09,800 Speaker 1: what's coming up in international relations? Well? I think the reality, 267 00:14:10,000 --> 00:14:11,720 Speaker 1: right is that a lot of what the US is 268 00:14:11,760 --> 00:14:13,720 Speaker 1: going to do going to push for it on this 269 00:14:13,720 --> 00:14:16,400 Speaker 1: this trade war with China, and but a lot of 270 00:14:16,400 --> 00:14:21,000 Speaker 1: what's going to be driving US engagement abroad is Donald 271 00:14:21,000 --> 00:14:24,640 Speaker 1: Trump looking back at Congress and looking to the mid 272 00:14:24,800 --> 00:14:28,480 Speaker 1: terms and trying to play very carefully and very strategically 273 00:14:28,600 --> 00:14:31,440 Speaker 1: to make sure that he comes out of those mid 274 00:14:31,560 --> 00:14:35,520 Speaker 1: terms looking like a strong president. And this is tricky. 275 00:14:35,560 --> 00:14:38,840 Speaker 1: He's not necessarily doing his his own party any favor 276 00:14:38,880 --> 00:14:42,520 Speaker 1: by threatening to shut down the government if he doesn't 277 00:14:42,560 --> 00:14:46,200 Speaker 1: get you know, um, the immigration plan through. Yeah, but 278 00:14:46,280 --> 00:14:49,120 Speaker 1: your studying, your study. This leslie as we're inside a 279 00:14:49,160 --> 00:14:51,640 Speaker 1: hundred days, and that's a big deal because that's where 280 00:14:51,680 --> 00:14:55,000 Speaker 1: I am. I mean, there's just something about a hundred days. 281 00:14:56,200 --> 00:14:58,000 Speaker 1: There's something about a hundred days, but it's a very 282 00:14:58,000 --> 00:15:01,680 Speaker 1: significant one days and unfore sinnately, right, it pulls everybody 283 00:15:01,680 --> 00:15:04,800 Speaker 1: into a very short term focus. Now, this is when 284 00:15:04,840 --> 00:15:07,200 Speaker 1: wonderful LESSI Vin Murray, thank you so much. I really 285 00:15:07,240 --> 00:15:09,840 Speaker 1: appreciate those comments. And Italy, John, I think it's really 286 00:15:09,840 --> 00:15:12,720 Speaker 1: below the radar. And you know, I'll be honest, John, 287 00:15:12,760 --> 00:15:17,120 Speaker 1: I watched R A I two the Italian TV just 288 00:15:17,160 --> 00:15:19,720 Speaker 1: to listen to the language. Like I'm serious, you're trying 289 00:15:19,760 --> 00:15:25,120 Speaker 1: to learn It's it's it's excruciatingly difficult, But without exaggeration, 290 00:15:25,440 --> 00:15:30,400 Speaker 1: every other news story was an immigration immigration. Try growing 291 00:15:30,520 --> 00:15:32,680 Speaker 1: up in a household that when you went to the 292 00:15:32,720 --> 00:15:35,360 Speaker 1: south of Italy, they didn't speak Italian. They spoke dialect, 293 00:15:35,720 --> 00:15:39,160 Speaker 1: and a dialect that was nicknamed the Italian Chinese. It 294 00:15:39,240 --> 00:15:42,440 Speaker 1: was so difficult to understand my grandparents because they wouldn't 295 00:15:42,440 --> 00:15:44,520 Speaker 1: speak to each other in Italian. They'd speak to each 296 00:15:44,560 --> 00:15:47,560 Speaker 1: other in the local dialect, which was another language entirely, 297 00:15:47,960 --> 00:15:52,360 Speaker 1: and it was abruptly difference. My father grew up down 298 00:15:52,400 --> 00:15:53,840 Speaker 1: in the south of Italy, and you learned to speak 299 00:15:53,880 --> 00:15:57,080 Speaker 1: dialect first and your second language. It's the language of 300 00:15:57,120 --> 00:15:59,800 Speaker 1: the country, Italian, and this would happen across the whole 301 00:15:59,800 --> 00:16:02,760 Speaker 1: of it as well. Yeah, so we're gonna teach you 302 00:16:02,840 --> 00:16:06,720 Speaker 1: some southern dialect in pulia Um after you've mastered Italian. 303 00:16:07,800 --> 00:16:11,480 Speaker 1: How do you like that? It's I can see the 304 00:16:11,480 --> 00:16:13,880 Speaker 1: excitement sort of just sort of oz from you this morning. 305 00:16:14,440 --> 00:16:16,880 Speaker 1: For those of you that have kids, particularly for those 306 00:16:16,880 --> 00:16:19,560 Speaker 1: of you older and your kids go, well, yeah, I'm 307 00:16:19,560 --> 00:16:22,320 Speaker 1: not fluent in Arabic yet, but I'm getting there. And 308 00:16:22,400 --> 00:16:24,440 Speaker 1: this new thing in America, John, which just say, no, 309 00:16:24,560 --> 00:16:26,800 Speaker 1: three languages and and one of them one of them Mandarin, 310 00:16:27,280 --> 00:16:30,920 Speaker 1: is I'm in awe. I am truly the ugly American 311 00:16:31,280 --> 00:16:33,000 Speaker 1: and I'll be honest, I'm not proud of it. Let 312 00:16:33,000 --> 00:16:36,560 Speaker 1: me tell you what I'm proud about. John. Afterthought, it's 313 00:16:36,640 --> 00:16:41,400 Speaker 1: just gone nuts over this song. This is what I'm proud. 314 00:16:41,600 --> 00:16:44,280 Speaker 1: We need to listen to what I heard all weekend, 315 00:16:44,920 --> 00:16:50,680 Speaker 1: loving it total. That's nice. You know everything you've played 316 00:16:50,720 --> 00:16:57,400 Speaker 1: in this slot. This is nice. I don't want to 317 00:16:57,400 --> 00:17:00,520 Speaker 1: do that. You don't know the song, not the song 318 00:17:00,560 --> 00:17:23,959 Speaker 1: that's next, folks, your favorite song? Do need a media update? 319 00:17:24,040 --> 00:17:27,160 Speaker 1: We're thrilled to christ mo Angie's with us with Gabelly 320 00:17:27,800 --> 00:17:30,439 Speaker 1: as we look at media, and of course Chris to 321 00:17:30,520 --> 00:17:34,120 Speaker 1: explain this with the vailue investment proposition of Brio, Gabelly 322 00:17:34,160 --> 00:17:37,920 Speaker 1: and your team. You've always been in media. How much 323 00:17:38,080 --> 00:17:42,320 Speaker 1: of a vailue is cable TV? After the Fox, Disney, 324 00:17:42,359 --> 00:17:47,640 Speaker 1: Comcast soap opera, Good Morning, Toma, Jonathan's great to be here. Um. Yeah, 325 00:17:47,840 --> 00:17:53,399 Speaker 1: the cable companies Comcast, Charter, amongst the others are a 326 00:17:53,440 --> 00:17:55,960 Speaker 1: bargain today, more of a bargain than they were before. 327 00:17:56,840 --> 00:18:00,440 Speaker 1: The counterbit for for Fox, um, these are good cash 328 00:18:00,480 --> 00:18:04,560 Speaker 1: flowing any recurring cash form, returning cash flow to shareholders, 329 00:18:04,600 --> 00:18:07,480 Speaker 1: and that's why we like them. Comcast did that shift 330 00:18:07,560 --> 00:18:11,040 Speaker 1: from huge build out to use of cash. On the 331 00:18:11,080 --> 00:18:13,920 Speaker 1: Bloomberg their five year dividend growth, there's a lofty four 332 00:18:13,960 --> 00:18:18,400 Speaker 1: point I'm assuming they can't sustain that, but can they 333 00:18:18,520 --> 00:18:23,040 Speaker 1: actually deliver double digit dividend growth? Is the the cash 334 00:18:23,080 --> 00:18:27,080 Speaker 1: flow that persistent? Yeah, The the return on capital on 335 00:18:27,119 --> 00:18:30,120 Speaker 1: the cash flow are growing substantially as the business make 336 00:18:30,160 --> 00:18:34,199 Speaker 1: shifts from video where they're giving up sixty cents of 337 00:18:34,240 --> 00:18:37,920 Speaker 1: every dollar to the program to the content companies UH 338 00:18:37,960 --> 00:18:41,040 Speaker 1: to broadband where they're keeping both that money and have 339 00:18:41,080 --> 00:18:43,320 Speaker 1: a lot of pricing power. What's interesting here, folks, is 340 00:18:43,359 --> 00:18:46,639 Speaker 1: we were talking with Craig Moffatt and Maffatt Nathanson with 341 00:18:46,800 --> 00:18:49,480 Speaker 1: his really important work on Comcast, Reason and then Marange. 342 00:18:49,960 --> 00:18:51,920 Speaker 1: It's sort of on what's called the bi side, which 343 00:18:51,960 --> 00:18:56,520 Speaker 1: is where he's actually making portfolio decisions and acquiring shares 344 00:18:56,920 --> 00:19:03,720 Speaker 1: as well. If comcasting cables cheap, what's rich in media? Well, 345 00:19:03,840 --> 00:19:06,879 Speaker 1: you point statistically to the to the fang stocks obviously, 346 00:19:06,920 --> 00:19:10,000 Speaker 1: and there's been sort of a saying anti fan trade. 347 00:19:10,200 --> 00:19:12,240 Speaker 1: When the fangs are strong, some of the traditional media 348 00:19:12,240 --> 00:19:14,639 Speaker 1: companies tend to be weak. I think that's starting to 349 00:19:14,640 --> 00:19:17,040 Speaker 1: break down a little bit. But um, you know, doesn't 350 00:19:17,040 --> 00:19:19,560 Speaker 1: mean that that Google and Netflix and others don't have 351 00:19:19,680 --> 00:19:23,800 Speaker 1: outstanding businesses. Netflix and particularly just you know, appears to 352 00:19:23,840 --> 00:19:27,439 Speaker 1: trade and with a minimal margin of safety. Yeah. I 353 00:19:27,440 --> 00:19:29,760 Speaker 1: thought it was interesting last week, Chris, and the performance 354 00:19:29,800 --> 00:19:33,840 Speaker 1: came from the old economy equities and the underperformance came 355 00:19:33,880 --> 00:19:36,080 Speaker 1: from the technology stocks. And I just wonder whether that's 356 00:19:36,080 --> 00:19:38,400 Speaker 1: a one off week or whether we're starting to transition 357 00:19:38,440 --> 00:19:40,920 Speaker 1: to a world where we can build some confidence around 358 00:19:40,920 --> 00:19:43,199 Speaker 1: what's happening in the global economy. Is Europe appears to 359 00:19:43,200 --> 00:19:46,439 Speaker 1: have stabilized, China appears to be shifting towards easing, and 360 00:19:46,480 --> 00:19:48,200 Speaker 1: we had that great growth here in the United States 361 00:19:48,240 --> 00:19:51,080 Speaker 1: in a second quarter. Yeah. I think it's an interesting point, Janathan. 362 00:19:51,160 --> 00:19:53,679 Speaker 1: The I think that the big tech names were viewed 363 00:19:53,760 --> 00:19:58,639 Speaker 1: as safe havens in some ways as UM growth elsewhere 364 00:19:58,640 --> 00:20:00,000 Speaker 1: started in the soul. So yeah, I think as we've 365 00:20:00,000 --> 00:20:03,840 Speaker 1: a little bit of stabilization, um, the trend of value should, 366 00:20:04,000 --> 00:20:07,159 Speaker 1: uh should persist. Chris. The trend of value has been 367 00:20:07,160 --> 00:20:10,440 Speaker 1: a very difficult one to buy into the last year 368 00:20:10,720 --> 00:20:12,320 Speaker 1: and many of our listeners have going to have heard 369 00:20:12,359 --> 00:20:14,840 Speaker 1: that again and again and again over the last couple 370 00:20:14,840 --> 00:20:17,800 Speaker 1: of years. Why is it different this time? Well, we're 371 00:20:17,800 --> 00:20:19,280 Speaker 1: hoping it's different this time. And you know, at the 372 00:20:19,359 --> 00:20:21,399 Speaker 1: in the end, we think that value um will always 373 00:20:21,400 --> 00:20:26,000 Speaker 1: win out. And uh, you know again with a kind 374 00:20:26,000 --> 00:20:29,560 Speaker 1: of a they're good places to be with maybe a 375 00:20:29,600 --> 00:20:32,520 Speaker 1: choppy political environment, but a stable economic environment. Does that 376 00:20:32,560 --> 00:20:36,679 Speaker 1: lift financials then, Chris, it should? You know. Obviously we 377 00:20:36,680 --> 00:20:39,159 Speaker 1: watched the curve and what's happening with the with the 378 00:20:39,160 --> 00:20:40,480 Speaker 1: finding of the curve, and I think that's been a 379 00:20:40,520 --> 00:20:44,760 Speaker 1: little bit of an issue. But um, yes, the financials 380 00:20:44,840 --> 00:20:48,879 Speaker 1: again statistically look very cheap here. It's something that's dominated psychology. 381 00:20:48,960 --> 00:20:51,240 Speaker 1: Is it dominated profitability? And I'm talking about the yield 382 00:20:51,280 --> 00:20:54,320 Speaker 1: curve here, Chris? Has it dominated profitability because I didn't 383 00:20:54,320 --> 00:20:57,320 Speaker 1: see it? Will it? No? I think you know, the 384 00:20:57,600 --> 00:20:59,480 Speaker 1: banks are able to make money, that they're in a 385 00:20:59,520 --> 00:21:01,920 Speaker 1: better regular tory situation, that they have been a long time, 386 00:21:01,960 --> 00:21:05,199 Speaker 1: able to return a lot more capitalist shareholders. Uh. So, 387 00:21:05,320 --> 00:21:07,119 Speaker 1: you know, I think there's I think maybe we're overly 388 00:21:07,119 --> 00:21:11,280 Speaker 1: focused on the shape of the curve. Well, okay, we're 389 00:21:11,280 --> 00:21:13,120 Speaker 1: overly focused on the shape of the curve, but it's 390 00:21:13,160 --> 00:21:17,000 Speaker 1: DETERMINANTU to some extend forward. What about the shape of 391 00:21:17,119 --> 00:21:20,240 Speaker 1: nominal GDP? I mean, if this is if this GDP 392 00:21:20,400 --> 00:21:23,560 Speaker 1: is as good as it gets and it ebbs away? 393 00:21:23,680 --> 00:21:28,760 Speaker 1: What ebbs in the Christmas Ange world? The revenues ebb Yeah. 394 00:21:28,800 --> 00:21:32,320 Speaker 1: So you know we've been talking about actually uh peat 395 00:21:32,400 --> 00:21:36,320 Speaker 1: margins for years. Uh and you know, margins just continue 396 00:21:36,359 --> 00:21:39,159 Speaker 1: to go up. I think we continue to find um 397 00:21:39,640 --> 00:21:42,400 Speaker 1: companies continue to find ways to save money. Obviously, one 398 00:21:42,400 --> 00:21:45,120 Speaker 1: of the themes from earnings the first two weeks has 399 00:21:45,160 --> 00:21:50,639 Speaker 1: been increased costs input costs, steel, energy, labor, freight, and 400 00:21:50,640 --> 00:21:52,040 Speaker 1: so we're starting to see some of those signs of 401 00:21:52,119 --> 00:21:55,520 Speaker 1: inflation which may which may impact margins. But you know, 402 00:21:55,520 --> 00:21:57,239 Speaker 1: we could get into another gear where we where we 403 00:21:57,520 --> 00:21:59,960 Speaker 1: see an increase in productivity. Again. Well, Chris Antists come 404 00:22:00,040 --> 00:22:02,600 Speaker 1: station with Jeff Rosenberg of Black Rock on Friday, and 405 00:22:02,640 --> 00:22:04,399 Speaker 1: we kept asking this question, is this as good as 406 00:22:04,400 --> 00:22:05,840 Speaker 1: it gets? And it may well be the highest right 407 00:22:05,880 --> 00:22:08,280 Speaker 1: of growth for any given quarter for this administration. But 408 00:22:08,320 --> 00:22:10,240 Speaker 1: I think a bigger question, and this is something that 409 00:22:10,280 --> 00:22:12,680 Speaker 1: Jeff was pushing over at blank Rock, is whether we've 410 00:22:12,680 --> 00:22:15,120 Speaker 1: broken out into higher trend growth away from the low 411 00:22:15,160 --> 00:22:17,320 Speaker 1: twos and something closer to three. Do you have the 412 00:22:17,359 --> 00:22:20,440 Speaker 1: confidence that we've done that? Chris, you know, we're we're 413 00:22:20,520 --> 00:22:23,640 Speaker 1: we're bottom up guys. And um. We look at individual 414 00:22:23,640 --> 00:22:25,719 Speaker 1: companies and and the other companies that we listened to 415 00:22:25,760 --> 00:22:28,560 Speaker 1: on these earnings calls. Um, you know, they see for 416 00:22:28,600 --> 00:22:31,520 Speaker 1: the most part, pretty clear skuys ahead. Um, you know, 417 00:22:31,520 --> 00:22:33,560 Speaker 1: absen some of these input class and absence some of 418 00:22:33,560 --> 00:22:36,440 Speaker 1: the risks of trade wars. But the consumer seems to 419 00:22:36,480 --> 00:22:39,440 Speaker 1: be in good shape. Housing Um is okay. And UM 420 00:22:39,480 --> 00:22:42,240 Speaker 1: you know, globally you're seeing some some pick up. It's 421 00:22:42,240 --> 00:22:44,560 Speaker 1: funny that we've just had a quarter of north of 422 00:22:44,600 --> 00:22:47,160 Speaker 1: four percent, and I've heard so many people talking about 423 00:22:47,280 --> 00:22:49,440 Speaker 1: whether we get a recession at some point the back 424 00:22:49,520 --> 00:22:52,199 Speaker 1: end the next year or early twenty I've heard a 425 00:22:52,240 --> 00:22:54,600 Speaker 1: lot of people discussed trade wars, and then Caterpillar comes 426 00:22:54,640 --> 00:22:59,280 Speaker 1: out this morning and raises four year guidance, full year guidance, 427 00:22:59,320 --> 00:23:02,480 Speaker 1: raising a core that was dominated by discussions about trade 428 00:23:02,520 --> 00:23:06,800 Speaker 1: wars and tariffs. How do you reconcile those two things? Chris? Yeah, well, 429 00:23:06,880 --> 00:23:09,560 Speaker 1: you know, uh, make farmers great again. I guess it 430 00:23:09,640 --> 00:23:13,120 Speaker 1: is the hat that I saw and um yeah that 431 00:23:13,119 --> 00:23:18,960 Speaker 1: that certainly helps some of the agricultural companies. And you know, 432 00:23:19,040 --> 00:23:23,960 Speaker 1: the demand, global demand is there, John, I think that's 433 00:23:24,760 --> 00:23:28,520 Speaker 1: Chris giout the Funds Co Chief investment officer and that 434 00:23:28,640 --> 00:23:30,879 Speaker 1: stock up this morning and doing really well. Tell me 435 00:23:45,720 --> 00:23:48,000 Speaker 1: fim Fox in time keening on Monday, lots of different 436 00:23:48,040 --> 00:23:50,600 Speaker 1: themes and mean jobs Day and Friday, b o J 437 00:23:51,280 --> 00:23:53,320 Speaker 1: the Fed. We're gonna talk Bank of England here. But 438 00:23:53,760 --> 00:23:56,520 Speaker 1: wandering into the studios, I just assumed she would mean 439 00:23:56,600 --> 00:23:59,879 Speaker 1: he'd struck London enjoying the coolness of the London of 440 00:24:00,119 --> 00:24:03,320 Speaker 1: I noticed the BBC map over the weekend where the 441 00:24:03,320 --> 00:24:06,080 Speaker 1: weather came in. It was like very cool. Here is 442 00:24:06,440 --> 00:24:10,119 Speaker 1: Stephanie Flanders, she's senior executive veditor for economics. It really 443 00:24:10,119 --> 00:24:16,040 Speaker 1: has moved forward holistic economic coverage region to region. So 444 00:24:16,119 --> 00:24:18,480 Speaker 1: let's just sort of a UK vamp here right now? 445 00:24:18,840 --> 00:24:23,320 Speaker 1: What's the biggest conundrum for MROs Thomas Simon Kennedy in 446 00:24:23,359 --> 00:24:27,200 Speaker 1: our vast Brexit team, Like, what's the July mystery into 447 00:24:27,280 --> 00:24:29,959 Speaker 1: August on Brexit? Right now? Look, you have, you know 448 00:24:30,000 --> 00:24:32,280 Speaker 1: how many question masks there are around the deal, whether 449 00:24:32,320 --> 00:24:35,119 Speaker 1: we'll even have one? Is a second referendum now on 450 00:24:35,160 --> 00:24:37,160 Speaker 1: the table. I think the whole sort of mood around 451 00:24:37,160 --> 00:24:39,240 Speaker 1: Brexit has changed in the last month in a way 452 00:24:39,280 --> 00:24:41,400 Speaker 1: that puts a lot of stuff up in the air, 453 00:24:41,680 --> 00:24:44,840 Speaker 1: raises the real prospect of a complete standoff in Parliament 454 00:24:44,840 --> 00:24:47,920 Speaker 1: where you can just start to imagine people turning around 455 00:24:47,960 --> 00:24:50,120 Speaker 1: and saying, you know what the in Parliament they've messed 456 00:24:50,160 --> 00:24:51,719 Speaker 1: it up. They haven't been able to do anything. We're 457 00:24:51,720 --> 00:24:53,560 Speaker 1: going to have to go back to the people. So 458 00:24:53,680 --> 00:24:56,359 Speaker 1: you one of your themes is there could be another 459 00:24:56,400 --> 00:24:58,560 Speaker 1: reference something that's in the air in a way that 460 00:24:58,600 --> 00:25:01,400 Speaker 1: it wasn't a month interesting And I think, but then 461 00:25:01,840 --> 00:25:03,760 Speaker 1: I think for me, the thing that gives me pause 462 00:25:03,840 --> 00:25:07,120 Speaker 1: around that is, Okay, if they're deadlocked on what kind 463 00:25:07,160 --> 00:25:08,800 Speaker 1: of deal or whether they're going to agree to the 464 00:25:08,840 --> 00:25:11,199 Speaker 1: deal that they're getting from the EU, how are they 465 00:25:11,240 --> 00:25:13,880 Speaker 1: possibly going to agree on the questions for a referendum. 466 00:25:14,040 --> 00:25:15,480 Speaker 1: I think that's one of the reasons I have for 467 00:25:15,480 --> 00:25:17,399 Speaker 1: thinking it won't happen, because how could you get an 468 00:25:17,440 --> 00:25:19,359 Speaker 1: agreement on what are the two options you give to 469 00:25:19,400 --> 00:25:21,960 Speaker 1: the gift of the public. Do you say no deal 470 00:25:22,080 --> 00:25:24,399 Speaker 1: is actually an option that people could choose, with a 471 00:25:24,480 --> 00:25:26,840 Speaker 1: risk that people would actually choose that and really get 472 00:25:26,880 --> 00:25:29,680 Speaker 1: the economy. It's a it's a tricky upper left corner 473 00:25:29,680 --> 00:25:33,240 Speaker 1: of the Telegraph today One B. Johnson is writing on 474 00:25:33,800 --> 00:25:38,680 Speaker 1: Mr J Corbin as well. Who is Boris Johnsen writing too? 475 00:25:39,440 --> 00:25:42,800 Speaker 1: On his new platform? He is writing to his I 476 00:25:42,840 --> 00:25:45,800 Speaker 1: think dwindling band of fans. You know, he's one of 477 00:25:45,840 --> 00:25:49,040 Speaker 1: those people we feel like we've seen peaque Boris, whether 478 00:25:49,080 --> 00:25:52,920 Speaker 1: regardless of whether he was Foreign Secretary or not. But 479 00:25:53,400 --> 00:25:55,879 Speaker 1: even though he could still have commanded a lot of 480 00:25:55,880 --> 00:25:58,879 Speaker 1: support even without even while having left the government, but 481 00:25:58,920 --> 00:26:01,040 Speaker 1: I think there is a feeling that he's sort of 482 00:26:01,080 --> 00:26:03,919 Speaker 1: gone gone too far in some directions and ended up 483 00:26:04,000 --> 00:26:06,280 Speaker 1: rather losing his way because he was stuck kind of 484 00:26:06,720 --> 00:26:10,080 Speaker 1: um not sort of semi supporting Theresa May and then 485 00:26:10,080 --> 00:26:12,560 Speaker 1: backing out the last minute only because somebody else had 486 00:26:12,600 --> 00:26:14,520 Speaker 1: then had left before him, so he lost a lot 487 00:26:14,520 --> 00:26:17,080 Speaker 1: of credibility around that. But I think the problem I have, 488 00:26:17,400 --> 00:26:19,240 Speaker 1: I think the problem for the Bank of England and 489 00:26:19,280 --> 00:26:23,400 Speaker 1: Mark Karney, who I interviewed for the cover of special 490 00:26:23,440 --> 00:26:27,840 Speaker 1: issue Special Economics issue we have of Bloomberg Markets this month. Um, 491 00:26:27,880 --> 00:26:29,520 Speaker 1: you know, the trouble for him is he's looking at 492 00:26:29,520 --> 00:26:33,200 Speaker 1: a weaker economy but also one that is probably going 493 00:26:33,240 --> 00:26:36,800 Speaker 1: to be affected long term by this Brexit uncertainty and 494 00:26:36,800 --> 00:26:41,360 Speaker 1: by the future deal. He's the cover story of Bloomberg Markets. 495 00:26:41,680 --> 00:26:43,879 Speaker 1: Mark Kearney, this is your your story. And what is 496 00:26:43,880 --> 00:26:47,399 Speaker 1: he going to enjoy more lenient immigration rules when it 497 00:26:47,400 --> 00:26:49,600 Speaker 1: comes to the European Union than most of the people 498 00:26:49,640 --> 00:26:52,320 Speaker 1: that he oversees At the Bank of England. I suspect 499 00:26:52,359 --> 00:26:54,080 Speaker 1: they would let him in. I mean, but what I 500 00:26:54,119 --> 00:26:56,879 Speaker 1: guess there is a question. He's from Canada. He's from Canada. 501 00:26:57,160 --> 00:26:58,919 Speaker 1: He and of course we're looking for a kind of 502 00:26:58,960 --> 00:27:01,040 Speaker 1: Canada plus deal. I mean, the Canada is one of 503 00:27:01,080 --> 00:27:03,760 Speaker 1: the models for the future relationship. I think the interesting 504 00:27:03,840 --> 00:27:05,840 Speaker 1: question has been that that whether or not he would 505 00:27:05,880 --> 00:27:07,720 Speaker 1: go back to Canada. And I did try and push 506 00:27:07,800 --> 00:27:09,520 Speaker 1: him on that a little bit, and he was he 507 00:27:09,560 --> 00:27:11,199 Speaker 1: was dodging the question. We don't know what he's going 508 00:27:11,240 --> 00:27:12,879 Speaker 1: to do at the end of next year, and we 509 00:27:12,920 --> 00:27:14,920 Speaker 1: really don't know who's going to replace him at the bank. 510 00:27:15,680 --> 00:27:19,679 Speaker 1: Do you see increases in prices? Look, you're seeing inflation, 511 00:27:20,280 --> 00:27:22,159 Speaker 1: but not the kind of wage growth. You know, it's 512 00:27:22,200 --> 00:27:24,560 Speaker 1: the same story we've seen elsewhere. There is some wage 513 00:27:24,600 --> 00:27:26,879 Speaker 1: pick up finally, but not the kind of growth that 514 00:27:26,920 --> 00:27:29,080 Speaker 1: you would say, Okay, inflation is now on an upward 515 00:27:29,119 --> 00:27:31,760 Speaker 1: path where the Bank of England is seeing the potential 516 00:27:31,800 --> 00:27:34,080 Speaker 1: for inflation to pick up is more from this again 517 00:27:34,080 --> 00:27:36,159 Speaker 1: the sort of question marks around the potential of the 518 00:27:36,200 --> 00:27:38,359 Speaker 1: economy if we're going to have a long term hit 519 00:27:38,440 --> 00:27:42,879 Speaker 1: and productivity growth on wealth growth from whatever deal we 520 00:27:42,920 --> 00:27:47,840 Speaker 1: get post having left EU. You know that is something 521 00:27:47,840 --> 00:27:49,360 Speaker 1: that they have to bear a man, because they're thinking 522 00:27:49,400 --> 00:27:51,560 Speaker 1: of two or three years out now when they're setting policy. 523 00:27:52,119 --> 00:27:54,760 Speaker 1: Do you see prices increasing its stores you shop with, 524 00:27:55,440 --> 00:27:58,000 Speaker 1: You know, we're not seeing we're not seeing a big 525 00:27:58,000 --> 00:28:00,040 Speaker 1: pick up in inflation. As ever, when the UK he 526 00:28:00,160 --> 00:28:02,080 Speaker 1: with such an open economy that a lot of what 527 00:28:02,119 --> 00:28:03,720 Speaker 1: we've seen in the last few years has been driven 528 00:28:03,760 --> 00:28:06,480 Speaker 1: by the pound. If the pound took another tumble in 529 00:28:06,560 --> 00:28:09,240 Speaker 1: response to the kind of shenanigans we were talking about earlier. 530 00:28:09,280 --> 00:28:12,000 Speaker 1: You know, that's probably the biggest single driver of inflation. 531 00:28:12,320 --> 00:28:14,600 Speaker 1: What did you know? You know, the cover is striking, 532 00:28:15,000 --> 00:28:20,840 Speaker 1: you know, it's an abrupt, an abrupt photograph of Mr 533 00:28:20,960 --> 00:28:24,840 Speaker 1: Kearney and the title of its stress tests is actually 534 00:28:25,040 --> 00:28:27,840 Speaker 1: important that because of Brexit and all that, but just 535 00:28:27,920 --> 00:28:31,520 Speaker 1: the banking system as well. How is the Nanti Kingdom's 536 00:28:31,520 --> 00:28:33,720 Speaker 1: banking system? You know, I was struck by talking to 537 00:28:33,800 --> 00:28:36,040 Speaker 1: him that how much of our conversation was around the 538 00:28:36,080 --> 00:28:38,840 Speaker 1: financial system. I mean, obviously it's it's often in those 539 00:28:38,920 --> 00:28:41,640 Speaker 1: kind of sit, sit down interviews, it's a less painful 540 00:28:41,680 --> 00:28:43,440 Speaker 1: conversation than when you try and get them to say 541 00:28:43,440 --> 00:28:46,600 Speaker 1: anything about monetary policy. But he is someone who came 542 00:28:46,640 --> 00:28:48,920 Speaker 1: in as the head of the Financial Stability Board, a 543 00:28:48,920 --> 00:28:51,959 Speaker 1: global board that was helping to push through the kind 544 00:28:51,960 --> 00:28:54,240 Speaker 1: of post crisis reform. So he's apt to it his 545 00:28:54,400 --> 00:28:58,240 Speaker 1: neck in this considerations around the stability of the financial system. 546 00:28:58,440 --> 00:29:00,120 Speaker 1: And as he says in the interview, the you K 547 00:29:00,280 --> 00:29:02,240 Speaker 1: was at the forefront a lot of the reforms and 548 00:29:02,280 --> 00:29:04,640 Speaker 1: analysis around what do we need to do around stress 549 00:29:04,680 --> 00:29:07,160 Speaker 1: tests and what do we need to do about capital. 550 00:29:07,400 --> 00:29:10,200 Speaker 1: I think the biggest concern coming out of Brexit for 551 00:29:10,200 --> 00:29:12,320 Speaker 1: the financial system, which he did we did. I did 552 00:29:12,400 --> 00:29:15,040 Speaker 1: manage to push him on, is you go back to 553 00:29:15,080 --> 00:29:17,560 Speaker 1: a system where the Europeans kind of have Brexit as 554 00:29:17,560 --> 00:29:19,880 Speaker 1: an excuse to beat to look inward. You know that 555 00:29:19,960 --> 00:29:24,400 Speaker 1: the UK has forced the European system to be much 556 00:29:24,400 --> 00:29:29,040 Speaker 1: more open, global, cosmopolitan financial system because it had the 557 00:29:29,360 --> 00:29:32,200 Speaker 1: London at its center. If you have London now in 558 00:29:32,240 --> 00:29:35,120 Speaker 1: a more kind of semi detached relationship, their instinct, the 559 00:29:35,160 --> 00:29:37,800 Speaker 1: French instinct, the German instinct is to bring activity on 560 00:29:37,960 --> 00:29:41,680 Speaker 1: shore and that gives Europe a less healthy, less global 561 00:29:41,680 --> 00:29:43,760 Speaker 1: financial system. Did you open I mean, it's such a 562 00:29:44,320 --> 00:29:47,360 Speaker 1: such a genuine interview where he really gives out a 563 00:29:47,400 --> 00:29:49,720 Speaker 1: lot of information. Did you open this by talking to 564 00:29:49,760 --> 00:29:52,520 Speaker 1: him about giant virus going to the Maple Liefs. We 565 00:29:52,600 --> 00:29:55,280 Speaker 1: didn't amaze. He didn't do that, but I was talking. 566 00:29:55,320 --> 00:29:57,720 Speaker 1: You know, we know he's he ice hockey was actually 567 00:29:57,760 --> 00:29:59,680 Speaker 1: the thing that he most when when all the school 568 00:29:59,760 --> 00:30:04,240 Speaker 1: chill and interview him in in London, they said in Britain, 569 00:30:04,240 --> 00:30:06,200 Speaker 1: and he does these sit downs with twelve year old 570 00:30:06,240 --> 00:30:08,479 Speaker 1: who asked the great questions, but one of the questions. 571 00:30:08,560 --> 00:30:10,800 Speaker 1: One of the questions was, you know what would you 572 00:30:10,800 --> 00:30:12,840 Speaker 1: be if you were in a central bank governor. He said, Oh, 573 00:30:12,880 --> 00:30:15,880 Speaker 1: I'd really prefer to have been exactly professional ice hockey 574 00:30:15,880 --> 00:30:19,640 Speaker 1: players always the number two. He was the sub Exactly, 575 00:30:19,680 --> 00:30:21,720 Speaker 1: you're gotta get the surveillance phone out and call me. 576 00:30:21,760 --> 00:30:23,320 Speaker 1: And I would have said, just sit down with him 577 00:30:23,320 --> 00:30:26,920 Speaker 1: and say to virus maple Leaf. Stanley Cup right, Steph 578 00:30:27,000 --> 00:30:37,120 Speaker 1: Flanders cover article Business Week with Mr Kearney. Thanks for 579 00:30:37,200 --> 00:30:41,600 Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to 580 00:30:41,760 --> 00:30:47,480 Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 581 00:30:48,040 --> 00:30:51,400 Speaker 1: I'm on Twitter at Tom Keene before the podcast. You 582 00:30:51,400 --> 00:31:00,960 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.