Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Along
Speaker 1: with my co host of Bonnie Quinn. Every business day
Speaker 1: we bring you interviews from CEO, market pros, and Bloomberg experts,
Speaker 1: along with essential market moving news. Find the Bloomberg Markets
Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
Speaker 1: and on Bloomberg dot com. Yesterday mark the day Phase
Speaker 1: two reopening for New York City. One of the areas
Speaker 1: that got a little bit of relief was the restaurant business.
Speaker 1: Outdoor dinning now allowed uh as the restaurant industry tries
Speaker 1: to get back on its feet. To get a sense
Speaker 1: of how that went and how the restaurant industry globally
Speaker 1: is faring here in this pandemic world, we welcome Kate,
Speaker 1: a creator food editor for Bloomberg Pursuits. Kate, thanks so
Speaker 1: much for joining us. Give us a sense of how
Speaker 1: you think the reopening of the restaurant business in New
Speaker 1: York City is gonna go. We're all gonna be sitting
Speaker 1: on sidewalks and in the middle of the street, I guess,
Speaker 1: But what did you what did you see yesterday and
Speaker 1: what are some of the restaurant tours thinking as as
Speaker 1: they reopen. Um, that's a really good question. Um. And
Speaker 1: I think, um, I think how it went and how
Speaker 1: it's gonna go, it depends on who you ask. Because
Speaker 1: for some people, so that's what terms. I think a
Speaker 1: lot of them are just delighted that they get to
Speaker 1: be back in business and serving people. And you know,
Speaker 1: they've been setting up table six ft apart and you know,
Speaker 1: all of a sudden like activating their parking lots and
Speaker 1: turning them into dining rooms. Um. But for then for
Speaker 1: some other people, it's not a one size fits all situation.
Speaker 1: And so for some people they realized that selling a
Speaker 1: ten dollar full of soup is not financially viable when
Speaker 1: you can only do fifty percent capacity and have people
Speaker 1: six feet apart. So it's different, it's different throughout. But
Speaker 1: I think there's a costive optimism, that's what I would say. Overall. Yeah, Okay,
Speaker 1: there are twenty seven thousand restaurants in New York City.
Speaker 1: Surely all of them don't have outside room, do they? No?
Speaker 1: They they go not in New York City. I mean
Speaker 1: they're has clothes. I think, like forty three miles of
Speaker 1: streets and that some of that can live the alleviate.
Speaker 1: A lot of restaurants were able to apply for outdoor
Speaker 1: seating permits in a place like Peter Luger and Brooklyn
Speaker 1: that has never ever served stake outside their doors. Um
Speaker 1: got the permit, got the permit, and as of Thursday,
Speaker 1: is going to have tables outside their restaurant and it's
Speaker 1: putting the parking lot into a sort of picnic area.
Speaker 1: So um, So a lot of restaurants can take advantage
Speaker 1: of it, but certainly you're right, not all of them can,
Speaker 1: and not all of them want to just to follow there.
Speaker 1: I wasn't sure if you needed a permit. How does
Speaker 1: the permitting system work and how much does it cost? Um,
Speaker 1: that's a good question that I haven't applied to a permit,
Speaker 1: and I'm not sure I know that. I know that
Speaker 1: the permitting um went live on I think it was
Speaker 1: it was either Thursday or Friday. So it's just like
Speaker 1: four or five days ago to have a permit for Monday.
Speaker 1: So there's been a lot of There hasn't always been
Speaker 1: great messaging from the government, you know. I think that
Speaker 1: a lot of restaurants and restaurateurs continue to have a
Speaker 1: lot of questions about what to do. For instance, you're
Speaker 1: eating outdoors, but what happens if you have to go
Speaker 1: to the bathroom because there's all these rules about distance
Speaker 1: and how many people can use the bathroom and all
Speaker 1: of it. So there's still a ton of questions. Um,
Speaker 1: But the permitting process, I think it went really quickly
Speaker 1: once people could apply, but the applications went up very late.
Speaker 1: As I understand it. It's okay. I know Leslie Patton
Speaker 1: and you wrote a story for Today on the Bloomberg
Speaker 1: and that the headline really grabbed me. Two point two
Speaker 1: million restaurants worldwide teeter on the brink of collapse? Can
Speaker 1: this restaurant industry? Is this gonna be permanently scarred here? Yeah?
Speaker 1: Oh my gosh, we're never gonna you know, if you
Speaker 1: think we're gonna get back to what it was like
Speaker 1: in February and we're not, you know, I think, Um,
Speaker 1: there's there's no way, there's no there's no going back.
Speaker 1: Everybody has to move forward on the successful people, the
Speaker 1: most successful restfuls were going to be the one realize
Speaker 1: that figure out see new new ways, new way forward,
Speaker 1: an opportunity. But um, there was reports from the National
Speaker 1: Restaurant Association that the industry has already lost twenty billion
Speaker 1: and they don't think they can be profitable for at
Speaker 1: least six months, and I think six months is optimistic, actually, yeah,
Speaker 1: And I mean for restaurants, you have to be profitable
Speaker 1: on a weekly basis in order to keep the running cade.
Speaker 1: How will the restaurants that have low occupancy to begin with,
Speaker 1: I mean several on My Street alone can only fit
Speaker 1: a certain amount of people. How do they manage week
Speaker 1: to week if they just don't get those extra ten
Speaker 1: customers that they need to make that profit margin. Yeah, Vanny,
Speaker 1: that's such a good question. And I think, especially right
Speaker 1: now in days two works all outdoor season. Um this
Speaker 1: um chef my Price at the Clam in New York
Speaker 1: was saying, you could have a slow Monday day, but
Speaker 1: you're Saturday Saturday would cover your cost. And now there's
Speaker 1: so many variables. And also outdoor seating is depending on weather.
Speaker 1: So if you have a rainy Saturday and you thought
Speaker 1: you had sold that, you know sort of sold out
Speaker 1: and then you can't get everybody in, that's a disaster.
Speaker 1: I mean a lot of them, A lot of restaurants
Speaker 1: have been enterprising and turned themselves into like grocery stores
Speaker 1: and selling cocktails, and that's done a surprisingly good job
Speaker 1: of helping, um, helping create income. But I think exactly
Speaker 1: as you said, it's still like the margins are so
Speaker 1: slim anyway. So, um, it's a real uh, it's it's
Speaker 1: a very challenging future. So just real quick, Um, in
Speaker 1: New York City, how many restaurants are expected that boy
Speaker 1: just go out of business? I guess, um, that's it's
Speaker 1: a good and scary question. Um. Open table to the survey,
Speaker 1: and they thought nathma of restaurants wouldn't make get I
Speaker 1: think in New York that number might be higher. I'm sure.
Speaker 1: I mean, I think that's a conservative estimate. Anyway, it
Speaker 1: in New York, as you guys were saying, space is
Speaker 1: much tighter, soft occupancy is is a big difference, like
Speaker 1: ten people, like Bonnie said, So I think that numbers
Speaker 1: can be higher. I would not be surprised if it's
Speaker 1: like at least it's a very scary number. Yeah, it's terrifying. Kate,
Speaker 1: there's some great details in your story. I would urge
Speaker 1: everyone to read a two point two million restaurants worldwide
Speaker 1: teeter on brink of collapse. That's Kate Crater. They're joining us.
Speaker 1: And one of those paragraphs, Paul lays out just how
Speaker 1: much it costs to change to contact less takeout orders
Speaker 1: and delivery, of course, and this equipment walkie talkies, masks, thermometers,
Speaker 1: but five thousand dollars a month for the average restaurant apparently, Yeah,
Speaker 1: that's the economics on delivery business not nearly as good
Speaker 1: as in store dining. Daty check Research produces a morning
Speaker 1: note that is always, always thought provoking, five days a week.
Speaker 1: Something just sparks the thought process when you take a
Speaker 1: look at the email. And in recent days the under
Speaker 1: Nicholas has been looking at everything from yield curve control
Speaker 1: to the impact of the upcoming elections on stocks and
Speaker 1: on markets, and how this do nothing market is just
Speaker 1: a little bit baffling, and some ideas for what to
Speaker 1: do in this do nothing market. Let's bring him in now,
Speaker 1: Nikola's co founder of data check or Research. Nick. Let's
Speaker 1: start with yield curve control, only because you pointed out
Speaker 1: today the New York Fed blog out which explains why
Speaker 1: yield curve control is more efficient than quantitative easing and
Speaker 1: at the same time in a different region, the St.
Speaker 1: Louisfide President Jim Bullard is saying, no, we're not going
Speaker 1: to have yield curve control. It's it's unnecessary. Yes, it
Speaker 1: was fascinating to see the New York Fed actually put
Speaker 1: out a blog analyzing the Japanese experience with yold curve
Speaker 1: control and pointed out very clearly the yield curve control
Speaker 1: has the advantage of not requiring as much capital from
Speaker 1: a central bank to execute a given rate target for
Speaker 1: say the long end of the curve. Instead of spending
Speaker 1: tents and tens and tens of billions of dollars to
Speaker 1: hold rates at a certain level, simply telling the market
Speaker 1: we're going to peg it at X means you have
Speaker 1: to spend much less money to make it stay at X.
Speaker 1: So it's fascinating to see the New York Feds saying
Speaker 1: there is some merit to yield of control in terms
Speaker 1: of efficiency in central bank balance sheets. Hey, Nick, I
Speaker 1: mean so when you think about this market here, are
Speaker 1: you concerned about what I'm going to term or the
Speaker 1: lack of breath if you will in this market? You know,
Speaker 1: this move off the bottom, it's you know, centered on
Speaker 1: a handful of names, the Amazons on the apples of
Speaker 1: the world. How much of a concern is that for you? Yeah,
Speaker 1: it's a fascinating point. I mean, if you look at
Speaker 1: the two thousand nine rallied, for example, which there are
Speaker 1: many analogs to the current rally, in that one, the
Speaker 1: two thousand nine rally was all about the banks. The
Speaker 1: banks doubled in value from March nine, two thousand nine,
Speaker 1: through the next sixty days, ninety days rather you know,
Speaker 1: basically the same days today, So it was led by
Speaker 1: banks even more than this has been led by tech.
Speaker 1: So it does feel that big snapback rallies off the
Speaker 1: bottom are always led by something. In OH nine, it
Speaker 1: was banks for all the obvious reasons. This time around,
Speaker 1: it's been tech because of all the stay at home,
Speaker 1: work at home phenomena that we're seeing still play out
Speaker 1: to this day, and that seems so caught investors attention.
Speaker 1: So I'd say, as unusual as it is, it does
Speaker 1: fit a paradigm for snap back rallies like OH nine
Speaker 1: and Nick Robin Hood has been a huge source of
Speaker 1: interest to you know, so many people all over the
Speaker 1: country in the recent days and weeks. Retail platform for
Speaker 1: retail traders. How much of an impact are these people
Speaker 1: that maybe have an average account size that you say,
Speaker 1: less than five thou dollars. How much of an impact
Speaker 1: are they really having on the market, you know, as
Speaker 1: a market impact, I'd say not that much. They do
Speaker 1: get a lot of press because of things like hurts
Speaker 1: and the U. S O E. T F before that,
Speaker 1: So they are making some rookie mistakes because that's what
Speaker 1: rookies do, and that's fine. But as you said, the
Speaker 1: account anances are relatively small. Robin Hood doesn't even have
Speaker 1: an I Rara product. This is all kind of discretionary
Speaker 1: retail money, taxable money, people putting in a couple of
Speaker 1: thousand dollars to play the market while sports betting is closed.
Speaker 1: So I think it's interesting, but I don't think it's
Speaker 1: had a big effect in terms of money flows. But
Speaker 1: I tell you, I mean, having looked at markets for
Speaker 1: thirty years, it is fascinating to see, you know, a
Speaker 1: couple of million people decided they want to trade stocks
Speaker 1: in the course of ninety days, because that hasn't happened
Speaker 1: in twenty years. So it's it's interesting to see. But
Speaker 1: from a money flow perspective, not all that relevant. Well, Nick,
Speaker 1: you are no rookies, you say thirty years, you're a
Speaker 1: grizzled veteran here. So you've been through a lot of
Speaker 1: presidential elections here, and somebody told me is an election year.
Speaker 1: How are you kind of nobody's really focusing on it
Speaker 1: right now because obviously there are bigger issues, more immediate
Speaker 1: issues for folks and investors. How are you thinking about
Speaker 1: the presidential election coming up here in the fall. You know,
Speaker 1: the way we're thinking about it is not just the
Speaker 1: president in the election, but the congressional ones as well.
Speaker 1: And we did some work for clients last night that
Speaker 1: looked at Okay, sit back in the nine. How does
Speaker 1: the market do when one party controls both the White
Speaker 1: House and Congress both chambers. It's only happened in thirty
Speaker 1: years over the last seventy five, so less than half
Speaker 1: the time. But when it does happen, if Republicans hold
Speaker 1: both White House and Congress, the S and P s
Speaker 1: up an average of six and when Democrats hold both
Speaker 1: houses both chambers and the White House, it's a fourteen
Speaker 1: point three percent on average, And the drawdowns are never
Speaker 1: really bad. Those are both better than the average sup
Speaker 1: returns in World War two, which is eleven. So the
Speaker 1: really important thing is somebody, either party, somebody has to
Speaker 1: own the economy, own the problems, and find the solutions.
Speaker 1: And as long as that happens, markets tend to do okay.
Speaker 1: So we're not as worried or focused on whether it's
Speaker 1: Mr Trump or Mr Biden as much as someone's got
Speaker 1: to own it, because particularly in the economy is still
Speaker 1: gonna need to need a lot of help, and if
Speaker 1: one party owns it, one party has to fix it. Yeah.
Speaker 1: We actually heard the black men say that yesterday as well,
Speaker 1: that he's not making any predictions or any trades based
Speaker 1: on who might be the next president. And at the
Speaker 1: same time, Nick, we're going to have such different policies
Speaker 1: under a Joe Biden than under a second term President Trump. Right, absolutely,
Speaker 1: I mean that the biggest worry I think for markets
Speaker 1: is okay. Corporate taxes obviously came down in two thousands
Speaker 1: seventeen will almost certainly go back up if Democrats control
Speaker 1: both chambers and the White House. But we might also
Speaker 1: see continuations of fiscal stimulus programs if unemployment continues to
Speaker 1: be high, and if one party owns the economy next year,
Speaker 1: they will have to figure out a way to make
Speaker 1: growth happen, even if it means more fiscal stimulus. So
Speaker 1: to me, it's TwixT and tween between the two problems. Yes,
Speaker 1: probably higher corporate taxes, but if we can we escape
Speaker 1: velocity and achieve a better economy through fiscal stimulus, that's
Speaker 1: a stive, So I think it balances out. So Nick,
Speaker 1: it seems like I'm just looking at the chart just
Speaker 1: on and showing kind of the COVID cases in the
Speaker 1: US and the you know, it's re recently, it's kind
Speaker 1: of turned the other way the wrong way here. Yet
Speaker 1: the market seems to be kind of discounting that so much.
Speaker 1: Whereas if this if we'd seen the spike up in
Speaker 1: big states like you know, Texas or Florida, we see
Speaker 1: I think a pretty negative reaction the markets back in
Speaker 1: February and early March and early April. What is your
Speaker 1: sense of kind of how the markets thinking about the
Speaker 1: virus per se, Yeah, very very important point. I think
Speaker 1: two things. The first is this is why tech is
Speaker 1: still rallying. You know, tech was the playoff to bottom
Speaker 1: because of work at home and all the other things
Speaker 1: we know, and tech continues to lead. That's one way
Speaker 1: of knowing that the market is saying, we're not going
Speaker 1: to play the rebound. The classic rebound trades were playing
Speaker 1: tech because those things work regardless of what happens with
Speaker 1: the virus and infection rates and how states managed lockdowns
Speaker 1: and so forth. The second point I think the market
Speaker 1: is saying is America is basically going to try to
Speaker 1: power through this. Infection rates are going up, but it
Speaker 1: seems to be among younger people with at least historically
Speaker 1: lower mortality rates, and so this will be a problem,
Speaker 1: but it won't be the existential problem that it was
Speaker 1: when we locked down the entire country for the better
Speaker 1: part of a month. So the market is saying profits
Speaker 1: going to recover, but we still want to be in
Speaker 1: the more defensive names for this environment, which is tech
Speaker 1: and technically it's the market higher and Nick, thanks so
Speaker 1: much for joining us once again. As always, we learn
Speaker 1: a thing or two when we talk with you. Nicholas,
Speaker 1: co founder, Data Trek Research. I recommend you read his stuff.
Speaker 1: It's just really, really insightful, really gives you some food
Speaker 1: for thought as we think about navigating these markets here
Speaker 1: in these uncertain times. But we learned a lot about
Speaker 1: Apple's strategy yesterday from him Cove at the Worldwide Developers Conference,
Speaker 1: which supplies virtually it can news. Let's bring in somebody
Speaker 1: who knows all about Apple and who can tell us
Speaker 1: what exactly we need to be watching out for. David
Speaker 1: Garrity as chief market strategist at laid Law and Company.
Speaker 1: So we got the big announcement yesterday, David that Apple
Speaker 1: is going to replace chips with its own chips, So
Speaker 1: Intel no longer needed, Intel no longer inside Apple inside
Speaker 1: these days, what else can we anticipate will emanate from
Speaker 1: the week that would be of useful interest to investors? Yeah, no, certainly, Vonnie.
Speaker 1: What's been coming into the conference, apart from the fact
Speaker 1: that they move away from Intel to their own design chips,
Speaker 1: is the fact that with regards to chip designs, they're
Speaker 1: going to use a r M designed chips as a
Speaker 1: platform across their entire range of hardware products, with the
Speaker 1: idea that this can not only provide benefits in terms
Speaker 1: of reduced power consumption, but also provide a standardized platform
Speaker 1: that their developers can write programs to across all of
Speaker 1: their products. So, David, give us a sense it seems
Speaker 1: like a have a big deal to me to moving
Speaker 1: away from you know, the tried and true chip maker
Speaker 1: that is Intel that they've used for many years, to
Speaker 1: their own chip. Why are they doing it? Why are
Speaker 1: they doing it now? What's kind of the rationale? Well,
Speaker 1: I mean Apple certainly has gotten to a scale where
Speaker 1: it's possible for them to consider investments, so they may
Speaker 1: not have done previously. Note, however, that you know, Apple
Speaker 1: historically has had a business in which they've been involved
Speaker 1: in designing semiconductors. Now they've had this in cooperation with
Speaker 1: IBM in terms of IBM was running the semiconductor fabrication
Speaker 1: plant where Apple design chips were made. So this is
Speaker 1: not entirely a new business for Apple and also speaks
Speaker 1: to the scale and also arguably speaks to what their
Speaker 1: own intentions are for their technology that perhaps Intel was
Speaker 1: not able to support as readily now in terms of
Speaker 1: supporting its developer community. Uh, Tim Coke has been trying
Speaker 1: to do a good job. But the US and Europe
Speaker 1: isn't astigating Apple over antitrust allegations. How much it takes
Speaker 1: from developers in the app store and so on. What happens?
Speaker 1: How does the story end. Well, you know, it's certainly
Speaker 1: this has gotten to be the services business for Apple
Speaker 1: has gotten to be a fairly significant portion of their
Speaker 1: overall revenue. High last year about forty six billion dollars
Speaker 1: of what Apple made was coming out of services. These
Speaker 1: are fueled by third party developers. Now, as we've read,
Speaker 1: and no Apple charges its third party developers of their
Speaker 1: revenues to actually have their products listed in the app store. Uh,
Speaker 1: you know, from the standpoint of business development, is a
Speaker 1: pretty big cut. One would argue that Apple perhaps could
Speaker 1: get by with something half or less of that and
Speaker 1: still provide a very encouraging signal to its third party
Speaker 1: developer community and at the same time themselves grow a
Speaker 1: very substantial business. So clearly the argument here around the
Speaker 1: economic in terms of this business model. Certainly Apple is
Speaker 1: in a position potentially to give more in order to
Speaker 1: maintain a vibrant third party developer community. David, A big
Speaker 1: part of the bull case for Apple stock is five
Speaker 1: G and the arrival of five G presumably will spark
Speaker 1: a super cycle in phone replacements. Of course Apple will
Speaker 1: benefit from that. What do you expect to hear what
Speaker 1: have we heard at this conference about five G and
Speaker 1: what it means for Apple, Uh, nothing in particular as
Speaker 1: of yet, but I would expect that the company should
Speaker 1: be making some indications that will get people excited about
Speaker 1: the upcoming launch in late September of the five G
Speaker 1: I phone. UM, you know, certainly the five G I phone.
Speaker 1: Apple in this regardless following other competitors as Apple as
Speaker 1: want to do in terms of adopting new technologies, but
Speaker 1: having an Apple product able of using five G networks
Speaker 1: and the greater speeds in data k of abilities those
Speaker 1: networks have, we do believe very much will prompt and
Speaker 1: upgrade in terms of the user base for the Apple
Speaker 1: iPhone something clearly. I think that given the scale of Apple, uh,
Speaker 1: you know, should be an important development for them in
Speaker 1: terms of not only their smartphone business but that of
Speaker 1: the overall smartphone market. Tim Cook was very vocal today
Speaker 1: about the President's decision to suspend the giving out of
Speaker 1: H one B visas through the end of the year
Speaker 1: new ones at least, and I'm curious, David, will this
Speaker 1: have an immediate impact on Apple? UM. I think if
Speaker 1: there's anything that we've learned, not specifically from Apple, but
Speaker 1: more from dealing with the COVID nineteen pandemic is that
Speaker 1: companies are more and more capable of operating on a
Speaker 1: distributed basis. We don't necessarily need to have workers co
Speaker 1: located now. It's obviously the intent of the H one
Speaker 1: B VISA program was to be bringing workers physically into
Speaker 1: a location here the United States in order to operate.
Speaker 1: I don't think that, you know, not having an H
Speaker 1: one B VISA program is going to be detrimental to
Speaker 1: Apple in the near term. The bigger implication, I think,
Speaker 1: not for Apple, but more for the US economy, is
Speaker 1: that by potentially denying five thousand high paid workers UH
Speaker 1: presence in the United States economy, the Trump administration has
Speaker 1: deprived the US economy of the spending that those five
Speaker 1: thousand well paid workers would bring with them. And so
Speaker 1: from this standpoint, it seems to our view sort of
Speaker 1: a cut the nose off, despite your face, kind of
Speaker 1: moved by the Trump administration, not very well informed and
Speaker 1: certainly misguided. David just got about a minute left. Is
Speaker 1: the overhang from regulatory risk that was building for the
Speaker 1: tech industry last year and going into this year, has
Speaker 1: that kind of abated given all that's going on in
Speaker 1: the world. Now. UM, I would say that, you know,
Speaker 1: there are a matter of prior news or triage, if
Speaker 1: you will, in terms of dealing with the things that
Speaker 1: confronts society COVID nineteen being first and foremost. But when
Speaker 1: things do settle down, once we get past the November election,
Speaker 1: I certainly do expect that there will continue to be
Speaker 1: demands for greater oversight with respect of the technology community,
Speaker 1: focus on data privacy. Um. You know, the extent to
Speaker 1: which media continues to be used, uh and to be
Speaker 1: manipulated with regards to the upcoming election remains a vital concern.
Speaker 1: So you know, there's a great deal that still remains
Speaker 1: to be done. Jack Dorsey, the CEO of Twitter, you know,
Speaker 1: certainly has broken ranks with others such as Zuckerberg and
Speaker 1: saying that they would take down political content or be
Speaker 1: more aggressive in policing this content. Um. But no, we're
Speaker 1: not out of the woods by any stretch of the
Speaker 1: imagination as far as greater oversight of the technology community. Hey, David,
Speaker 1: thanks so much for joining us. As always, A good
Speaker 1: wrap up a kind of what's going on at Apple
Speaker 1: their event this week, as well as all things technology.
Speaker 1: David Garretty chief mark strategist at laid Law and also
Speaker 1: a partner at bt Block, giving us his overview of
Speaker 1: the market. Alsy, remember when trade headlines used to quit
Speaker 1: the markets? Exactly right. We had a little reminder of
Speaker 1: that yesterday and into this morning when Peter Novarro, the
Speaker 1: White House advisor, who of course has been appointed to
Speaker 1: help the president on US trade with China, sold confusion
Speaker 1: in a Fox interview. He said basically that the US
Speaker 1: China trade agreement was over. Well, you might think that
Speaker 1: that would have snuck by markets, but no, we got
Speaker 1: a big change in markets, and US President Donald Trump
Speaker 1: actually had to come out and clarify and say no, actually,
Speaker 1: the deal with China is fully intact. For more on
Speaker 1: what went on behind the scenes and what we should
Speaker 1: expect trade wise over the next six months, let's bring
Speaker 1: in Bloomberg Trades. Are Brendan Murray joining us from London? Brendan,
Speaker 1: what was this all about? Was Peter Navarro trying to
Speaker 1: sew some mischief for the Chinese? Well he sounded like uh.
Speaker 1: In an answer to a question on a TV interview
Speaker 1: that the that the that the that the China US
Speaker 1: trade deal, this Phase one deal that they signed in
Speaker 1: January was over. Uh, and so that's that obviously is
Speaker 1: underpinning a lot of agricultural purchases and uh and other
Speaker 1: things that you know, the Trump administration negotiated. Uh and
Speaker 1: they you know, put the American companies under a lot
Speaker 1: of stress with tariffs over the past few years. So
Speaker 1: the news that or the apparent news that that that
Speaker 1: that deal had come undone, uh, you know, was really
Speaker 1: what's investors now. It turns out that President Trump tweeted
Speaker 1: just a little while later that that that the deal
Speaker 1: was still intact. That uh, you know Peter Navarro, you know,
Speaker 1: who wrote a book called Death by China incidentally, uh,
Speaker 1: you know, was was misunderstood. So you know, he's obviously
Speaker 1: one of the you know, one of the most one
Speaker 1: of the most hawkish um members of the Trump economic
Speaker 1: team on China. So it's no surprising that you know,
Speaker 1: he you know, he thinks that you know, the trust
Speaker 1: has gone. But uh, yeah, it's definitely it goes to
Speaker 1: show you that, you know, markets are you know, kind
Speaker 1: of on edge, and and if that trade deal disintegrates,
Speaker 1: then you know, we might see you know, even more selling.
Speaker 1: So Brendan, what is the status of the Phase one deal. Ever,
Speaker 1: it's some reports where maybe China's only bought maybe or
Speaker 1: so or of what they were committed to in terms
Speaker 1: of agricultural products and and other other products. Where are
Speaker 1: we with phase one? So the person to listen to
Speaker 1: on Phase one is Robert Lightheiser, the U S trade representatives,
Speaker 1: the deal he negotiated. He you know, seems to be
Speaker 1: the point person on at not to Barrow. So if
Speaker 1: you if you listen to Lightheiser, he thinks that basically China, uh,
Speaker 1: and he testified in Congress last week that China really
Speaker 1: didn't get started buying uh, you know, the agricultural commodities
Speaker 1: that they promised to until maybe March or April kind
Speaker 1: of once they got through the worst of the coronavirus
Speaker 1: outbreaks there. So he he sounds a bit sympathetic, and
Speaker 1: you know, it's giving them the benefit of the doubt,
Speaker 1: and you know it's and has seen some purchases in
Speaker 1: recent weeks. Uh. You know, whether that continues is anybody's guess.
Speaker 1: But Lightheizer, for his part, at least, you know, seems
Speaker 1: to be still still confident that that it's gonna that
Speaker 1: purchase are going to pick up in the second half
Speaker 1: of the year in China will keep you know, keep
Speaker 1: those commitments well. And there was always the question mark
Speaker 1: over whether China could actually fulfill all the purchases that
Speaker 1: I had promised. But separately from that, Brendan, was there
Speaker 1: any impact on the deal from the John Bolton allegations
Speaker 1: that the president sort of asked China too. You know,
Speaker 1: it's not something we didn't know or didn't suspect, but
Speaker 1: the sort of very black and white the idea that
Speaker 1: the National Security Advisor was saying that President Trump straight
Speaker 1: out asked China to buy agricultural goods in states where
Speaker 1: he might be you know, on the balance between getting
Speaker 1: reelected and not reelected. Will that have any impact on
Speaker 1: the talks? It doesn't seem to have had an impact on,
Speaker 1: you know, the actual deal that they signed itself. But
Speaker 1: it just throws it just throws the whole relationship, you know,
Speaker 1: into more into into more turmoil. And you know, if
Speaker 1: you doubted, uh, you know, if you doubted whether there
Speaker 1: were political motivations behind um, you know that that that
Speaker 1: deal that Trump was pushing, you know, you might you might,
Speaker 1: you might think twice now, but but it's it's it's
Speaker 1: definitely added a layer of intrigue and UH and and
Speaker 1: a lot to talk about in Washington. In Washington at
Speaker 1: least so Brendan, you say, Robert, Robert Laheiser's is one
Speaker 1: of the folks in Washington we should be listening to.
Speaker 1: And he recently said in Bloomberg News was reporting that
Speaker 1: UH tariffs, maybe even higher tariffs on medical supplies and
Speaker 1: PPE would be a good thing. I'm just not sure
Speaker 1: how that would be to the extent we are seeing
Speaker 1: some spikes in cases and we may have a you know,
Speaker 1: kind of another wave of the virus in the all.
Speaker 1: What do you think his logic is there? Well, his
Speaker 1: logic is that if we put tariffs on on imports,
Speaker 1: then then producers will have an incentive to make them domestically.
Speaker 1: So his his you know, tariffs drive you know, the
Speaker 1: return of manufacturing jobs to to the U S in uh. Uh.
Speaker 1: Ambassador Lightheiser's, um, you know world, And you know that's
Speaker 1: debatable obviously, but um, you know, it's it's it's it
Speaker 1: gives you a sense of of all that we've been
Speaker 1: through two years of the trade war with China, three
Speaker 1: hundred and seventy billion dollars worth of of teariffs, of
Speaker 1: of products that have tariffs on them. You know that
Speaker 1: he still finds UH and some problems with the you know,
Speaker 1: the medical supplies, the personal prospective equipment coming to the
Speaker 1: US during the during the worst of the pandemic. You
Speaker 1: know that that tariffs still UH, you know, are the
Speaker 1: answer for him and UM. You know it kind of
Speaker 1: it could give you a sense to of where where
Speaker 1: we might be headed with UH, with Europe in the
Speaker 1: trade relationship. That's that's not getting better either, UM and UH,
Speaker 1: and you know sets up sets us up for an
Speaker 1: interesting second half of the year. Brendan Murray with the
Speaker 1: understatement of the day, perhaps Brendan Murray trades are for
Speaker 1: Bloomberg News. We always appreciate getting your perspective on trade
Speaker 1: and his bonny. As you mentioned, it's kind of a
Speaker 1: topic we haven't spent too much time on over the
Speaker 1: past couple of months as we've been dealing with the pandemic.
Speaker 1: But as you suggested earlier, Vannie, that that it is
Speaker 1: still you know, right front and center for the markets
Speaker 1: here because it really impacts the economic trajector duty if
Speaker 1: not only the United States, but also our trading partners
Speaker 1: around the world so it bears watching, and folks like
Speaker 1: Brenda Murray help us do that. Thanks for listening to
Speaker 1: the Bloomberg Markets podcast. You can subscribe and listen to
Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.
Speaker 1: I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn. And
Speaker 1: Paul Sweeney I'm on Twitter at pt Sweeney. Before the podcast,
Speaker 1: you can always is catch us worldwide at Bloomberg Radio