Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. Big
Speaker 1: week of Central Bank decisions with President Donald Trump casting
Speaker 1: a long political shadow over this week's meeting of the
Speaker 1: Federal Reserve in more ways than one. Joining me to
Speaker 1: discuss this Bruce Chasma, JP Morgan, chief economist and managing
Speaker 1: director of Global Research, and he joins us here in
Speaker 1: New York. Good money to Bruce. Good morning, big week, big,
Speaker 1: big week ahead, and let's begin with the Fed. This
Speaker 1: administration thinks we can have sustainable GDP growth of three
Speaker 1: plus percent. The Federal Reserve says otherwise, how does that
Speaker 1: tension materialize over the next couple of months, Well over
Speaker 1: the next couple of months the Fed moves in September.
Speaker 1: I'm not sure there's a lot of reason for the
Speaker 1: administration that criticize the Fed, but maybe we continue to
Speaker 1: get it. I think the issue for the Fed is
Speaker 1: they're not quite yet at neutral. Uh. They see an
Speaker 1: economy that is gonna likely deliver growth close to three
Speaker 1: percent over the next couple of quarters. But labor markets
Speaker 1: keep tightening, inflation continues to drift up. It's telling them
Speaker 1: we're growing above where the sustainable paces, and policy needs
Speaker 1: to be more close to neutral. Did you see anything
Speaker 1: in fridayce print that gives you confidence that this could
Speaker 1: be sustainable? Um? Well, I think in the short term yes,
Speaker 1: because you have an economy which, yes, that number was
Speaker 1: juiced up by a big trade contribution that's going to
Speaker 1: go away. But we have good solid underpinnings in terms
Speaker 1: of both business spending and household spending. The fiscal stimulus
Speaker 1: is still kicking in. And boy, that was a very
Speaker 1: weak inventory number, which sets you up nicely for the
Speaker 1: second It really interesting that a lot of people focused
Speaker 1: on the contribution from trite, but the contribution of try
Speaker 1: it was offset from inventories. Yeah, so I think in
Speaker 1: the second half you lose the trade and you gain
Speaker 1: the inventories, and there's a there's a little bit of
Speaker 1: a negative probably on balance there, but not a big negative.
Speaker 1: So we think the third quarter is going to be
Speaker 1: something like three and a half, which isn't a big
Speaker 1: step down and we think the second half is probably
Speaker 1: gonna average at least three percent. So we're still doing well.
Speaker 1: But we're doing well, and we're gonna have a tightening
Speaker 1: labor market. One thing we haven't mentioned is we've got
Speaker 1: an employment report this week, and we think we're going
Speaker 1: to get another two thousand gain, a dip in the
Speaker 1: unemployment rate. I think what's interesting is we're not seeing
Speaker 1: wage pressures build very rapidly, but I think there is
Speaker 1: a sign that underneath the surface labor bargaining power starting
Speaker 1: to firm here. What it also fun interesting is that
Speaker 1: that's a renewed focused on the participation right started to
Speaker 1: creep higher, and whether this administration starts to communicate towards
Speaker 1: the federal Reserve, perhaps with even more sort of conviction
Speaker 1: that hey, guys, white, look, the way you're thinking about
Speaker 1: the labor market of the last five years is dead wrong.
Speaker 1: Because people are started to come back in well, people
Speaker 1: have and the prime age participation rate has moved up.
Speaker 1: But if you get the noise around month to month data,
Speaker 1: the participation rate has done nothing but stay stable here.
Speaker 1: And I think the basic point here is there are
Speaker 1: too many people like me in the workforce. The baby
Speaker 1: boomers who are gradually starting to move into retirement age,
Speaker 1: and that's off setting the benefits of bringing those workers back.
Speaker 1: Well within that is the labor participation rate and some
Speaker 1: of these other dynamics, and it goes. I don't know
Speaker 1: if John gets this mail, John gets a lot more
Speaker 1: mail on um, you know, World Cup and all that.
Speaker 1: I get mail that says when Bruce Casman says the
Speaker 1: economy is great and we're fully employed, no one believes it.
Speaker 1: And you know, Washington Post had a whole series of
Speaker 1: charts a week ago, you know, from Bloomberg that underscored
Speaker 1: that are we fully employed? Well, I think we have
Speaker 1: to be careful what we mean by fully employed. Fully
Speaker 1: employed doesn't mean that we can attract more people to
Speaker 1: come into the workforce. What it does mean is in
Speaker 1: order to do so, you have to incentivize them more
Speaker 1: by paying them a higher way age. Isn't that happening? Well,
Speaker 1: it's happening, but very modestly. I think the question around
Speaker 1: that is how much of it is due to bad things,
Speaker 1: which is that labor bargaining power just structurally weak, and
Speaker 1: how much of its productivity weakness, which has been a
Speaker 1: key theme in the economy and how much of it
Speaker 1: is just that the pressures of brewing here and we're
Speaker 1: gonna start to see it reflected it It takes time.
Speaker 1: Maybe the unemployment rate can get into the high threes
Speaker 1: before we start to see that pressure build. Um. I
Speaker 1: think there's a lot to debate on that, but I
Speaker 1: think I think there's no doubt that somewhere between a
Speaker 1: four percent unemployment rate and zero we're gonna have problems.
Speaker 1: And I think there's no doubt that at a three
Speaker 1: percent growth rate, the unemployer rate is going to keep falling.
Speaker 1: John nailed the savings. To me, the biggest deal was
Speaker 1: the revision of savings. Was that a gain to the elite.
Speaker 1: Did the savings charts swing up to more savings in
Speaker 1: America just because of a statement that the rich got richer? Um?
Speaker 1: I think the savings rate, by the way, is one
Speaker 1: of the worst measured pieces of economic news. The average
Speaker 1: revision to the u S savings rate over the last
Speaker 1: thirty years has been from the first print to where
Speaker 1: we are now is four percentage points. So anytime we
Speaker 1: have a conversation about the savings rate, we should realize
Speaker 1: it's poorly measured. Yes, we had a lot of proprietary
Speaker 1: income of people who are working self employees. You may
Speaker 1: you can debate where that shows up on the distribution
Speaker 1: of income um, but I think the basic point is
Speaker 1: do not have a debate. I think in any short
Speaker 1: term horizon over the savings rate level telling you something
Speaker 1: about where households are for what it's worth. The revision
Speaker 1: does suggest there's more fuel in the tank for households,
Speaker 1: and I think we are seeing household behavior uh look
Speaker 1: better today than it was over the most of the
Speaker 1: past expansion where some of that saving was built up.
Speaker 1: Caught up with a series of sources of mind on
Speaker 1: the buy side on Friday and asked them just a
Speaker 1: very basic question. If I offered you the outcome of
Speaker 1: even the Federal Reserve meeting this week or the Bank
Speaker 1: of Japan meeting this week, which one would you like,
Speaker 1: right here, right now on Friday? And they all said
Speaker 1: to me the Bank of Japan. Obviously the focus seems
Speaker 1: to be the b J overn. What are you looking
Speaker 1: forth from the Bank of japanas we gotta sleep in
Speaker 1: New York and wake up tomorrow. Well, I think part
Speaker 1: of it is if we don't quite know what the
Speaker 1: bo J is going to do. The b o J
Speaker 1: has attention the Fed doesn't have right now. Uh, the
Speaker 1: b o J is not hitting its inflation target. The
Speaker 1: last inflation report was actually very disappointing, So there's every
Speaker 1: reason for them to hold the line. In fact, you
Speaker 1: could argue they should be doing more, but they're sitting
Speaker 1: there watching the flatness of the curve a road bank
Speaker 1: profitability and they're not happy about that. So there's a
Speaker 1: at tension here between financial stability and macroeconomic objectives, and
Speaker 1: certainly the the newsflow has suggested that that is going
Speaker 1: to actually get them to give us a rise in
Speaker 1: the yield control target with a doversh signal about forward guidance.
Speaker 1: Somewhat strange then that they've stepped in three times after
Speaker 1: the last week to cap yields. Can you reconcile that
Speaker 1: with a shift overnight? Because I struggled to well, I
Speaker 1: think I think part of the issue here is that
Speaker 1: when you're dealing with a control tenure yield, any time
Speaker 1: you want to signal changes, even if they are very
Speaker 1: small changes, you have a really hard time controlling in
Speaker 1: the market. And I think they're doing that. They haven't
Speaker 1: made the change, yet yields have already moved up to
Speaker 1: ten basis points. Their target is zero at the current point.
Speaker 1: If they don't come in and uh stabilize that, they're
Speaker 1: gonna have a much bigger problem. First, thank you so much,
Speaker 1: greatly greatly appreciated. First Castell with JP Morgan with I
Speaker 1: think some optims what I heard there, we didn't talk
Speaker 1: about it here about on television earlier was the fiscal
Speaker 1: stimulus coming along with a half percent calculation by his
Speaker 1: shop Leslie Benjamurra with his chadow mouse, Leslie, this is
Speaker 1: all below the radar. The leader of Italy and controversial
Speaker 1: is going to visit with the president. What will occur? Well,
Speaker 1: I think you know, this is been Trump recognizing that
Speaker 1: this is a leader who backed him at the G
Speaker 1: seven when he said we need to invite Russians in.
Speaker 1: Who's you know looking uh, you know, for Conte, this
Speaker 1: is wonderful for his position domestically. So I think, you know,
Speaker 1: the affirmation of it of an ally, of a partner,
Speaker 1: of a friendly, friendly voice in Europe at a time
Speaker 1: when things haven't been great with Europe. But somebody who
Speaker 1: has it takes a similarly you know, his country's taking
Speaker 1: governments saying a similarly hard line on immigration, it's open
Speaker 1: to Russia. Um, I think this is you know, forging
Speaker 1: his his his populous network. And in John I should
Speaker 1: mention this is Prime Minister Giuzeppe, well done, and this
Speaker 1: is not the Deputy Prime Minister mcdeo Silvini. Wow, you
Speaker 1: spent the whole weekend practical I would save me save
Speaker 1: I can't get why not the worst? I'm gonna put
Speaker 1: you in touch with my youngest sister who speaks beautiful,
Speaker 1: fluent Italian. And maybe if you said a love BiblioTech
Speaker 1: and that got me nowhere in the court. Okay, let's
Speaker 1: be let's move on. If if you chance to Angela Merkeley,
Speaker 1: you worried about today's mazing Oh, I think yes, I mean,
Speaker 1: I think inevitably everybody is worried about what's happening in Italy.
Speaker 1: It doesn't the optics of you know, the Italian PM
Speaker 1: going across uh To to talk with Trump on the
Speaker 1: back of those comments about Russia. You know, things of
Speaker 1: in the short terms gotten a little bit better with
Speaker 1: the EU on trade, but there's still this this broader conversation.
Speaker 1: What are Trump's real objectives when it comes to Europe
Speaker 1: and who does he feel closest to him? Right now,
Speaker 1: it still looks like he feels closest to the wrong
Speaker 1: part of Europe. Rachel Donadio in The Atlantic has a
Speaker 1: really timely article Italy's voters aren't anti immigration, but their
Speaker 1: government is. And you know, whether it's the United States
Speaker 1: or it's Italy, that's a huge tension, leslie Vinjamuri, isn't
Speaker 1: it between sort of the humanitarian kind of thing and
Speaker 1: voters saying enough and governments that have taken a stand. Yeah,
Speaker 1: but you know, voters are divided. There's of course, I'm
Speaker 1: in the US, right, and this is an immigrant nation.
Speaker 1: People understand and have long understood the important of immigrants
Speaker 1: to the economy and just morally and ethically to the country, um,
Speaker 1: to the you know, the fabric of the country. At
Speaker 1: the same time, the rhetoric has been very powerful with
Speaker 1: a certain segment of the population in Europe. It's powerful
Speaker 1: on the back of you know, is Italy and effect
Speaker 1: being a frontline state on the immigration crisis, on the
Speaker 1: migration crisis, and in the US, um there's certainly a
Speaker 1: very certain contingent that is that Trump is speaking to
Speaker 1: So it's that forging, you know, at the elite level,
Speaker 1: right Trump and Um and Conte. It's it's very it's
Speaker 1: it is playing a certain kind of politics that you're
Speaker 1: right to point to. But Leslie, we do often confuse
Speaker 1: too really important issues and one is a refugee crisis
Speaker 1: and the other is an immigration crisis. Can you just
Speaker 1: talk me through why those are two very important distinctions
Speaker 1: to make well, because you know, there's refugees have a
Speaker 1: right under international law to be protected, to be given
Speaker 1: um access and but but leaders in the current in
Speaker 1: the current context are reluctant. You know, there's a there's
Speaker 1: a playing on the there's a desire to kind of
Speaker 1: talk to us about themigration crisis and not to differentiate
Speaker 1: because the numbers are so vasked, it's complicated to differentiate.
Speaker 1: It's not that easy to differentiate between a refugee who
Speaker 1: has legitimate right to be protected under international law and
Speaker 1: a migrant. So Leslie, for a lot of people and
Speaker 1: for a lot of the electorate in a place like
Speaker 1: Italy at the moment, they looked to the likes of
Speaker 1: Mattea Salvini and Giuseppe Conte, who heads this government as
Speaker 1: those that are actually a weight to the reality of
Speaker 1: what is happening in a country like Italy on the
Speaker 1: front line of both the refugee and immigration crisis. And
Speaker 1: I'm just wondering, for those with a more liberal view
Speaker 1: of the world, what is the election winning argument, how
Speaker 1: do those individuals get into power? And what is the
Speaker 1: argument on an issue like the refugee crisis and on
Speaker 1: another issue like the immigration crisis that actually resonates with
Speaker 1: the electorate. Well, I mean, I think the reality is
Speaker 1: that it's it's an argument, but it's got to be
Speaker 1: backed up now there. You know, it's clearly the case
Speaker 1: that even for those who are very sympathetic to the
Speaker 1: plight of refugees, who want to um keep keep some
Speaker 1: sort of protection in place, there's got to still be
Speaker 1: a very effective regime in place that can maintain borders
Speaker 1: otherwise inevitably right, the space is open towards populace to
Speaker 1: manipulate the the language of fear and um and are
Speaker 1: successful in doing so so cooperation with Europe emphasizing the
Speaker 1: importance of protecting refugees while while not denying the very
Speaker 1: real problem of of managing and sharing uh the immigrants.
Speaker 1: What would you call the international relations foundation of the
Speaker 1: US right now? I mean it's not you know, is
Speaker 1: free to would say a post American world, or maybe
Speaker 1: it's not a clash of civilizations, Thank you, Mr Honeyton.
Speaker 1: What is the underlying theory that drives US international relations? Well,
Speaker 1: you know, the big debate, as you well know, Tom,
Speaker 1: right now is whether this is just an aberration, whether
Speaker 1: the US will get back on track and start supporting
Speaker 1: the institutions that it has created and and supported and
Speaker 1: short up for seventy years or more more, whether Trump
Speaker 1: is really about Trump is m about an under underlying
Speaker 1: social economic change, and that we're just going to see
Speaker 1: more of this. But I think right now people are
Speaker 1: very worried, and I'd say I would really point in
Speaker 1: not at the last eighteen months, but really at the
Speaker 1: last two or three months, where those who thought that
Speaker 1: America was just going through a bad time are now
Speaker 1: starting to think that we're in this. This is a
Speaker 1: permanent change that the US has been in the fine
Speaker 1: and it's and it's now saying we will no longer
Speaker 1: and show up these institutions. We need to renegotiate our
Speaker 1: role in the Well we mentioned the Italian leader today
Speaker 1: visiting what on your eight calendars the next thing? Or
Speaker 1: have you checked out until Labor Day? I mean, what's
Speaker 1: what's coming up in international relations? Well? I think the reality,
Speaker 1: right is that a lot of what the US is
Speaker 1: going to do going to push for it on this
Speaker 1: this trade war with China, and but a lot of
Speaker 1: what's going to be driving US engagement abroad is Donald
Speaker 1: Trump looking back at Congress and looking to the mid
Speaker 1: terms and trying to play very carefully and very strategically
Speaker 1: to make sure that he comes out of those mid
Speaker 1: terms looking like a strong president. And this is tricky.
Speaker 1: He's not necessarily doing his his own party any favor
Speaker 1: by threatening to shut down the government if he doesn't
Speaker 1: get you know, um, the immigration plan through. Yeah, but
Speaker 1: your studying, your study. This leslie as we're inside a
Speaker 1: hundred days, and that's a big deal because that's where
Speaker 1: I am. I mean, there's just something about a hundred days.
Speaker 1: There's something about a hundred days, but it's a very
Speaker 1: significant one days and unfore sinnately, right, it pulls everybody
Speaker 1: into a very short term focus. Now, this is when
Speaker 1: wonderful LESSI Vin Murray, thank you so much. I really
Speaker 1: appreciate those comments. And Italy, John, I think it's really
Speaker 1: below the radar. And you know, I'll be honest, John,
Speaker 1: I watched R A I two the Italian TV just
Speaker 1: to listen to the language. Like I'm serious, you're trying
Speaker 1: to learn It's it's it's excruciatingly difficult, But without exaggeration,
Speaker 1: every other news story was an immigration immigration. Try growing
Speaker 1: up in a household that when you went to the
Speaker 1: south of Italy, they didn't speak Italian. They spoke dialect,
Speaker 1: and a dialect that was nicknamed the Italian Chinese. It
Speaker 1: was so difficult to understand my grandparents because they wouldn't
Speaker 1: speak to each other in Italian. They'd speak to each
Speaker 1: other in the local dialect, which was another language entirely,
Speaker 1: and it was abruptly difference. My father grew up down
Speaker 1: in the south of Italy, and you learned to speak
Speaker 1: dialect first and your second language. It's the language of
Speaker 1: the country, Italian, and this would happen across the whole
Speaker 1: of it as well. Yeah, so we're gonna teach you
Speaker 1: some southern dialect in pulia Um after you've mastered Italian.
Speaker 1: How do you like that? It's I can see the
Speaker 1: excitement sort of just sort of oz from you this morning.
Speaker 1: For those of you that have kids, particularly for those
Speaker 1: of you older and your kids go, well, yeah, I'm
Speaker 1: not fluent in Arabic yet, but I'm getting there. And
Speaker 1: this new thing in America, John, which just say, no,
Speaker 1: three languages and and one of them one of them Mandarin,
Speaker 1: is I'm in awe. I am truly the ugly American
Speaker 1: and I'll be honest, I'm not proud of it. Let
Speaker 1: me tell you what I'm proud about. John. Afterthought, it's
Speaker 1: just gone nuts over this song. This is what I'm proud.
Speaker 1: We need to listen to what I heard all weekend,
Speaker 1: loving it total. That's nice. You know everything you've played
Speaker 1: in this slot. This is nice. I don't want to
Speaker 1: do that. You don't know the song, not the song
Speaker 1: that's next, folks, your favorite song? Do need a media update?
Speaker 1: We're thrilled to christ mo Angie's with us with Gabelly
Speaker 1: as we look at media, and of course Chris to
Speaker 1: explain this with the vailue investment proposition of Brio, Gabelly
Speaker 1: and your team. You've always been in media. How much
Speaker 1: of a vailue is cable TV? After the Fox, Disney,
Speaker 1: Comcast soap opera, Good Morning, Toma, Jonathan's great to be here. Um. Yeah,
Speaker 1: the cable companies Comcast, Charter, amongst the others are a
Speaker 1: bargain today, more of a bargain than they were before.
Speaker 1: The counterbit for for Fox, um, these are good cash
Speaker 1: flowing any recurring cash form, returning cash flow to shareholders,
Speaker 1: and that's why we like them. Comcast did that shift
Speaker 1: from huge build out to use of cash. On the
Speaker 1: Bloomberg their five year dividend growth, there's a lofty four
Speaker 1: point I'm assuming they can't sustain that, but can they
Speaker 1: actually deliver double digit dividend growth? Is the the cash
Speaker 1: flow that persistent? Yeah, The the return on capital on
Speaker 1: the cash flow are growing substantially as the business make
Speaker 1: shifts from video where they're giving up sixty cents of
Speaker 1: every dollar to the program to the content companies UH
Speaker 1: to broadband where they're keeping both that money and have
Speaker 1: a lot of pricing power. What's interesting here, folks, is
Speaker 1: we were talking with Craig Moffatt and Maffatt Nathanson with
Speaker 1: his really important work on Comcast, Reason and then Marange.
Speaker 1: It's sort of on what's called the bi side, which
Speaker 1: is where he's actually making portfolio decisions and acquiring shares
Speaker 1: as well. If comcasting cables cheap, what's rich in media? Well,
Speaker 1: you point statistically to the to the fang stocks obviously,
Speaker 1: and there's been sort of a saying anti fan trade.
Speaker 1: When the fangs are strong, some of the traditional media
Speaker 1: companies tend to be weak. I think that's starting to
Speaker 1: break down a little bit. But um, you know, doesn't
Speaker 1: mean that that Google and Netflix and others don't have
Speaker 1: outstanding businesses. Netflix and particularly just you know, appears to
Speaker 1: trade and with a minimal margin of safety. Yeah. I
Speaker 1: thought it was interesting last week, Chris, and the performance
Speaker 1: came from the old economy equities and the underperformance came
Speaker 1: from the technology stocks. And I just wonder whether that's
Speaker 1: a one off week or whether we're starting to transition
Speaker 1: to a world where we can build some confidence around
Speaker 1: what's happening in the global economy. Is Europe appears to
Speaker 1: have stabilized, China appears to be shifting towards easing, and
Speaker 1: we had that great growth here in the United States
Speaker 1: in a second quarter. Yeah. I think it's an interesting point, Janathan.
Speaker 1: The I think that the big tech names were viewed
Speaker 1: as safe havens in some ways as UM growth elsewhere
Speaker 1: started in the soul. So yeah, I think as we've
Speaker 1: a little bit of stabilization, um, the trend of value should,
Speaker 1: uh should persist. Chris. The trend of value has been
Speaker 1: a very difficult one to buy into the last year
Speaker 1: and many of our listeners have going to have heard
Speaker 1: that again and again and again over the last couple
Speaker 1: of years. Why is it different this time? Well, we're
Speaker 1: hoping it's different this time. And you know, at the
Speaker 1: in the end, we think that value um will always
Speaker 1: win out. And uh, you know again with a kind
Speaker 1: of a they're good places to be with maybe a
Speaker 1: choppy political environment, but a stable economic environment. Does that
Speaker 1: lift financials then, Chris, it should? You know. Obviously we
Speaker 1: watched the curve and what's happening with the with the
Speaker 1: finding of the curve, and I think that's been a
Speaker 1: little bit of an issue. But um, yes, the financials
Speaker 1: again statistically look very cheap here. It's something that's dominated psychology.
Speaker 1: Is it dominated profitability? And I'm talking about the yield
Speaker 1: curve here, Chris? Has it dominated profitability because I didn't
Speaker 1: see it? Will it? No? I think you know, the
Speaker 1: banks are able to make money, that they're in a
Speaker 1: better regular tory situation, that they have been a long time,
Speaker 1: able to return a lot more capitalist shareholders. Uh. So,
Speaker 1: you know, I think there's I think maybe we're overly
Speaker 1: focused on the shape of the curve. Well, okay, we're
Speaker 1: overly focused on the shape of the curve, but it's
Speaker 1: DETERMINANTU to some extend forward. What about the shape of
Speaker 1: nominal GDP? I mean, if this is if this GDP
Speaker 1: is as good as it gets and it ebbs away?
Speaker 1: What ebbs in the Christmas Ange world? The revenues ebb Yeah.
Speaker 1: So you know we've been talking about actually uh peat
Speaker 1: margins for years. Uh and you know, margins just continue
Speaker 1: to go up. I think we continue to find um
Speaker 1: companies continue to find ways to save money. Obviously, one
Speaker 1: of the themes from earnings the first two weeks has
Speaker 1: been increased costs input costs, steel, energy, labor, freight, and
Speaker 1: so we're starting to see some of those signs of
Speaker 1: inflation which may which may impact margins. But you know,
Speaker 1: we could get into another gear where we where we
Speaker 1: see an increase in productivity. Again. Well, Chris Antists come
Speaker 1: station with Jeff Rosenberg of Black Rock on Friday, and
Speaker 1: we kept asking this question, is this as good as
Speaker 1: it gets? And it may well be the highest right
Speaker 1: of growth for any given quarter for this administration. But
Speaker 1: I think a bigger question, and this is something that
Speaker 1: Jeff was pushing over at blank Rock, is whether we've
Speaker 1: broken out into higher trend growth away from the low
Speaker 1: twos and something closer to three. Do you have the
Speaker 1: confidence that we've done that? Chris, you know, we're we're
Speaker 1: we're bottom up guys. And um. We look at individual
Speaker 1: companies and and the other companies that we listened to
Speaker 1: on these earnings calls. Um, you know, they see for
Speaker 1: the most part, pretty clear skuys ahead. Um, you know,
Speaker 1: absen some of these input class and absence some of
Speaker 1: the risks of trade wars. But the consumer seems to
Speaker 1: be in good shape. Housing Um is okay. And UM
Speaker 1: you know, globally you're seeing some some pick up. It's
Speaker 1: funny that we've just had a quarter of north of
Speaker 1: four percent, and I've heard so many people talking about
Speaker 1: whether we get a recession at some point the back
Speaker 1: end the next year or early twenty I've heard a
Speaker 1: lot of people discussed trade wars, and then Caterpillar comes
Speaker 1: out this morning and raises four year guidance, full year guidance,
Speaker 1: raising a core that was dominated by discussions about trade
Speaker 1: wars and tariffs. How do you reconcile those two things? Chris? Yeah, well,
Speaker 1: you know, uh, make farmers great again. I guess it
Speaker 1: is the hat that I saw and um yeah that
Speaker 1: that certainly helps some of the agricultural companies. And you know,
Speaker 1: the demand, global demand is there, John, I think that's
Speaker 1: Chris giout the Funds Co Chief investment officer and that
Speaker 1: stock up this morning and doing really well. Tell me
Speaker 1: fim Fox in time keening on Monday, lots of different
Speaker 1: themes and mean jobs Day and Friday, b o J
Speaker 1: the Fed. We're gonna talk Bank of England here. But
Speaker 1: wandering into the studios, I just assumed she would mean
Speaker 1: he'd struck London enjoying the coolness of the London of
Speaker 1: I noticed the BBC map over the weekend where the
Speaker 1: weather came in. It was like very cool. Here is
Speaker 1: Stephanie Flanders, she's senior executive veditor for economics. It really
Speaker 1: has moved forward holistic economic coverage region to region. So
Speaker 1: let's just sort of a UK vamp here right now?
Speaker 1: What's the biggest conundrum for MROs Thomas Simon Kennedy in
Speaker 1: our vast Brexit team, Like, what's the July mystery into
Speaker 1: August on Brexit? Right now? Look, you have, you know
Speaker 1: how many question masks there are around the deal, whether
Speaker 1: we'll even have one? Is a second referendum now on
Speaker 1: the table. I think the whole sort of mood around
Speaker 1: Brexit has changed in the last month in a way
Speaker 1: that puts a lot of stuff up in the air,
Speaker 1: raises the real prospect of a complete standoff in Parliament
Speaker 1: where you can just start to imagine people turning around
Speaker 1: and saying, you know what the in Parliament they've messed
Speaker 1: it up. They haven't been able to do anything. We're
Speaker 1: going to have to go back to the people. So
Speaker 1: you one of your themes is there could be another
Speaker 1: reference something that's in the air in a way that
Speaker 1: it wasn't a month interesting And I think, but then
Speaker 1: I think for me, the thing that gives me pause
Speaker 1: around that is, Okay, if they're deadlocked on what kind
Speaker 1: of deal or whether they're going to agree to the
Speaker 1: deal that they're getting from the EU, how are they
Speaker 1: possibly going to agree on the questions for a referendum.
Speaker 1: I think that's one of the reasons I have for
Speaker 1: thinking it won't happen, because how could you get an
Speaker 1: agreement on what are the two options you give to
Speaker 1: the gift of the public. Do you say no deal
Speaker 1: is actually an option that people could choose, with a
Speaker 1: risk that people would actually choose that and really get
Speaker 1: the economy. It's a it's a tricky upper left corner
Speaker 1: of the Telegraph today One B. Johnson is writing on
Speaker 1: Mr J Corbin as well. Who is Boris Johnsen writing too?
Speaker 1: On his new platform? He is writing to his I
Speaker 1: think dwindling band of fans. You know, he's one of
Speaker 1: those people we feel like we've seen peaque Boris, whether
Speaker 1: regardless of whether he was Foreign Secretary or not. But
Speaker 1: even though he could still have commanded a lot of
Speaker 1: support even without even while having left the government, but
Speaker 1: I think there is a feeling that he's sort of
Speaker 1: gone gone too far in some directions and ended up
Speaker 1: rather losing his way because he was stuck kind of
Speaker 1: um not sort of semi supporting Theresa May and then
Speaker 1: backing out the last minute only because somebody else had
Speaker 1: then had left before him, so he lost a lot
Speaker 1: of credibility around that. But I think the problem I have,
Speaker 1: I think the problem for the Bank of England and
Speaker 1: Mark Karney, who I interviewed for the cover of special
Speaker 1: issue Special Economics issue we have of Bloomberg Markets this month. Um,
Speaker 1: you know, the trouble for him is he's looking at
Speaker 1: a weaker economy but also one that is probably going
Speaker 1: to be affected long term by this Brexit uncertainty and
Speaker 1: by the future deal. He's the cover story of Bloomberg Markets.
Speaker 1: Mark Kearney, this is your your story. And what is
Speaker 1: he going to enjoy more lenient immigration rules when it
Speaker 1: comes to the European Union than most of the people
Speaker 1: that he oversees At the Bank of England. I suspect
Speaker 1: they would let him in. I mean, but what I
Speaker 1: guess there is a question. He's from Canada. He's from Canada.
Speaker 1: He and of course we're looking for a kind of
Speaker 1: Canada plus deal. I mean, the Canada is one of
Speaker 1: the models for the future relationship. I think the interesting
Speaker 1: question has been that that whether or not he would
Speaker 1: go back to Canada. And I did try and push
Speaker 1: him on that a little bit, and he was he
Speaker 1: was dodging the question. We don't know what he's going
Speaker 1: to do at the end of next year, and we
Speaker 1: really don't know who's going to replace him at the bank.
Speaker 1: Do you see increases in prices? Look, you're seeing inflation,
Speaker 1: but not the kind of wage growth. You know, it's
Speaker 1: the same story we've seen elsewhere. There is some wage
Speaker 1: pick up finally, but not the kind of growth that
Speaker 1: you would say, Okay, inflation is now on an upward
Speaker 1: path where the Bank of England is seeing the potential
Speaker 1: for inflation to pick up is more from this again
Speaker 1: the sort of question marks around the potential of the
Speaker 1: economy if we're going to have a long term hit
Speaker 1: and productivity growth on wealth growth from whatever deal we
Speaker 1: get post having left EU. You know that is something
Speaker 1: that they have to bear a man, because they're thinking
Speaker 1: of two or three years out now when they're setting policy.
Speaker 1: Do you see prices increasing its stores you shop with,
Speaker 1: You know, we're not seeing we're not seeing a big
Speaker 1: pick up in inflation. As ever, when the UK he
Speaker 1: with such an open economy that a lot of what
Speaker 1: we've seen in the last few years has been driven
Speaker 1: by the pound. If the pound took another tumble in
Speaker 1: response to the kind of shenanigans we were talking about earlier.
Speaker 1: You know, that's probably the biggest single driver of inflation.
Speaker 1: What did you know? You know, the cover is striking,
Speaker 1: you know, it's an abrupt, an abrupt photograph of Mr
Speaker 1: Kearney and the title of its stress tests is actually
Speaker 1: important that because of Brexit and all that, but just
Speaker 1: the banking system as well. How is the Nanti Kingdom's
Speaker 1: banking system? You know, I was struck by talking to
Speaker 1: him that how much of our conversation was around the
Speaker 1: financial system. I mean, obviously it's it's often in those
Speaker 1: kind of sit, sit down interviews, it's a less painful
Speaker 1: conversation than when you try and get them to say
Speaker 1: anything about monetary policy. But he is someone who came
Speaker 1: in as the head of the Financial Stability Board, a
Speaker 1: global board that was helping to push through the kind
Speaker 1: of post crisis reform. So he's apt to it his
Speaker 1: neck in this considerations around the stability of the financial system.
Speaker 1: And as he says in the interview, the you K
Speaker 1: was at the forefront a lot of the reforms and
Speaker 1: analysis around what do we need to do around stress
Speaker 1: tests and what do we need to do about capital.
Speaker 1: I think the biggest concern coming out of Brexit for
Speaker 1: the financial system, which he did we did. I did
Speaker 1: manage to push him on, is you go back to
Speaker 1: a system where the Europeans kind of have Brexit as
Speaker 1: an excuse to beat to look inward. You know that
Speaker 1: the UK has forced the European system to be much
Speaker 1: more open, global, cosmopolitan financial system because it had the
Speaker 1: London at its center. If you have London now in
Speaker 1: a more kind of semi detached relationship, their instinct, the
Speaker 1: French instinct, the German instinct is to bring activity on
Speaker 1: shore and that gives Europe a less healthy, less global
Speaker 1: financial system. Did you open I mean, it's such a
Speaker 1: such a genuine interview where he really gives out a
Speaker 1: lot of information. Did you open this by talking to
Speaker 1: him about giant virus going to the Maple Liefs. We
Speaker 1: didn't amaze. He didn't do that, but I was talking.
Speaker 1: You know, we know he's he ice hockey was actually
Speaker 1: the thing that he most when when all the school
Speaker 1: chill and interview him in in London, they said in Britain,
Speaker 1: and he does these sit downs with twelve year old
Speaker 1: who asked the great questions, but one of the questions.
Speaker 1: One of the questions was, you know what would you
Speaker 1: be if you were in a central bank governor. He said, Oh,
Speaker 1: I'd really prefer to have been exactly professional ice hockey
Speaker 1: players always the number two. He was the sub Exactly,
Speaker 1: you're gotta get the surveillance phone out and call me.
Speaker 1: And I would have said, just sit down with him
Speaker 1: and say to virus maple Leaf. Stanley Cup right, Steph
Speaker 1: Flanders cover article Business Week with Mr Kearney. Thanks for
Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to
Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keene before the podcast. You
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.