WEBVTT - Surveillance: Political Pendulum With UCL's Klaas 0:00:09.880 --> 0:00:13.800 Welcome to the Bloomberg Surveillance Podcast. I'm Tom keene Jailey. 0:00:13.960 --> 0:00:17.560 We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.320 Bloomberg dot Com, and of course, on the Bloomberg. Let's 0:00:27.360 --> 0:00:30.200 begin the conversation on Bloomberg Surveillance with Michael Shall, market 0:00:30.200 --> 0:00:34.000 Field Acid Management CEO and portfolio manager. Michael fantastic to 0:00:34.040 --> 0:00:36.000 catch up with you, sir. We'll start with a simple one, 0:00:36.240 --> 0:00:38.680 How on earth do you navigate the next twenty four 0:00:38.720 --> 0:00:43.720 hours for this market? I think with no great certainty. 0:00:44.240 --> 0:00:46.000 You know, we don't know who's going to win the election. 0:00:46.240 --> 0:00:48.760 I think that that it looks likely but Biden will win, 0:00:49.280 --> 0:00:51.560 not clear that the Democrats will take the Senate. And 0:00:51.800 --> 0:00:55.040 what's even less clear is what the markets immediate reaction 0:00:55.080 --> 0:00:57.320 will be. So you know, I'm still at the mindset 0:00:58.240 --> 0:01:00.760 there are certain things that seem to be happening globally. 0:01:01.560 --> 0:01:05.600 Is a cyclical rebound in endurable goods um led by 0:01:05.640 --> 0:01:08.039 the US and Asia, and I think that will continue 0:01:08.040 --> 0:01:11.039 whoever wins the White House and pretty much everything else. 0:01:11.480 --> 0:01:13.080 I think you simply have to say you don't know, 0:01:13.200 --> 0:01:15.920 and deal with not knowing. That's where I wanted to go, Michael. 0:01:15.959 --> 0:01:18.120 I wanted to get a from you know, the domestic politics. 0:01:18.120 --> 0:01:21.319 We'll do that with some other good guests here this morning. Michael, 0:01:21.360 --> 0:01:25.720 I'm fascinated by what you think about e M in 0:01:25.840 --> 0:01:29.440 what seems to be ain't not a surge, but just 0:01:29.520 --> 0:01:35.319 a resiliency and up to e M why is that occurring? Well, 0:01:35.520 --> 0:01:38.880 it's two stories. One is index composition. The the Emerging 0:01:38.920 --> 0:01:42.360 Market Index is now absolutely dominated by Asia, you know, 0:01:42.400 --> 0:01:46.800 particularly South Korea, Taiwan, China and obviously Chinese listed in 0:01:46.840 --> 0:01:50.880 Hong Kong UM. And you know, those countries are very 0:01:50.960 --> 0:01:55.160 the least affected large economies by COVID directly, so you 0:01:55.200 --> 0:01:59.680 have stable domestic demand. Um. They also feed in you know, 0:01:59.720 --> 0:02:04.480 Healy into technology and heavy industrial activity, and and that 0:02:04.680 --> 0:02:07.480 remains the strongest part of the of the domestic of 0:02:07.520 --> 0:02:11.359 the domestic US economy. So you know, for various reasons 0:02:11.360 --> 0:02:13.320 this time around, e M is is something of a 0:02:13.360 --> 0:02:16.760 haven and the underlying currencies are strong. I heard your 0:02:16.800 --> 0:02:18.360 comments on the dollar. You know, I would say the 0:02:18.400 --> 0:02:20.840 dollar is less weak at ninety four rather than stronger 0:02:20.960 --> 0:02:23.480 ninety four. But the currencies which have really been strong 0:02:23.520 --> 0:02:26.760 this year have been the Asian currencies. Um. And you know, 0:02:26.800 --> 0:02:28.760 you put all of that together, E M is A 0:02:29.080 --> 0:02:32.440 is a relatively safe place to be right now, Michael, 0:02:32.440 --> 0:02:34.480 what's more important for your investment thesis right now? The 0:02:34.520 --> 0:02:38.880 US election or the path of the virus? You know, 0:02:38.919 --> 0:02:40.920 I would save the latter, and I would say the 0:02:40.960 --> 0:02:44.839 impact of the latter on demand for doable goods. Um. 0:02:44.880 --> 0:02:46.520 You know, because that has been as I say that 0:02:46.600 --> 0:02:49.240 the big plus of the last few months has been 0:02:49.240 --> 0:02:52.800 the resilience and in fact, lappily the acceleration of spending 0:02:52.800 --> 0:02:55.720 on doable goods in the face of a violence which 0:02:55.800 --> 0:02:58.200 has has has not been under control, certainly in the 0:02:58.280 --> 0:03:01.440 United States. Michael. What do you see in the high 0:03:01.480 --> 0:03:03.600 frequency data at the moment and do you think that 0:03:03.639 --> 0:03:07.079 should drive risk assets in the United States? You know, 0:03:07.160 --> 0:03:09.120 I think it's less important than it was. I mean, 0:03:09.160 --> 0:03:11.919 the high frequency data told us in the springtime that 0:03:11.840 --> 0:03:16.040 the people were starting to you know, engage in you know, 0:03:16.080 --> 0:03:19.680 engage in commerce again. Um. You know, I think, you know, 0:03:20.000 --> 0:03:22.160 I don't think it's as important today. You know that 0:03:22.240 --> 0:03:27.200 there's the fluctuations that you see in something like restaurant usage. Um, 0:03:27.280 --> 0:03:30.520 you know, I think that that you know, I think 0:03:30.520 --> 0:03:32.480 that you have the point, but you do need a 0:03:32.560 --> 0:03:34.359 leap of faith to invest at this point in time. 0:03:34.400 --> 0:03:36.440 I think you're entitled to say that the virus is 0:03:37.000 --> 0:03:39.840 not going to be conquered the foreseeable future, and the 0:03:39.880 --> 0:03:41.880 European economy is going to turn turtle and you're going 0:03:41.960 --> 0:03:44.160 to go super defensive. Yeah, I think that would be 0:03:44.240 --> 0:03:46.720 a mistake, or you're entitled to save. But we've come 0:03:46.800 --> 0:03:50.240 this far, and we've seen patterns of spending emerged from 0:03:50.280 --> 0:03:53.040 the virus that look to be resilient and look to 0:03:53.120 --> 0:03:57.400 be fairly long lasting. And you know, a narrow portfolio 0:03:57.520 --> 0:04:00.800 that focuses on on on the positive. I hate to 0:04:00.800 --> 0:04:04.440 say the positives to the virus, um you probably makes 0:04:04.440 --> 0:04:07.000 sense going forward. I want to bring up a d 0:04:07.200 --> 0:04:09.520 x Y, folks. This is a really important series. This 0:04:09.600 --> 0:04:15.440 is basically Pacific RIM currencies, Asia currencies, UH less Japan 0:04:15.840 --> 0:04:17.760 is well on the chart. I hope we get it up. 0:04:17.760 --> 0:04:21.120 Here goes back to UH the beginning of UH the 0:04:21.240 --> 0:04:23.520 year and I I look Michael Scholl at a d 0:04:23.760 --> 0:04:25.600 x Y. That's not the right chart, Folks, will get 0:04:25.600 --> 0:04:27.799 it for you. Here in a bit, but it's basically 0:04:27.839 --> 0:04:31.880 been a moonshot within that. What's the specificity in the 0:04:31.920 --> 0:04:34.560 Pacific room there? It is up we go off of 0:04:34.640 --> 0:04:37.160 the March low for those of you on radio, it's 0:04:37.200 --> 0:04:40.520 a moonshot from March straight up. On the Asian currency. 0:04:40.520 --> 0:04:45.080 Good morning, Michael Purvis, Michael Scholl. What is the specificity 0:04:45.120 --> 0:04:47.240 on the Pacific rim? I want to get granuel here? 0:04:47.279 --> 0:04:49.560 Do you buy big gap, do you buy consumer? What 0:04:49.560 --> 0:04:53.320 do you buy um? You know? You know, I think 0:04:53.360 --> 0:04:57.480 index level, career, Taiwan both, you know, both quite interesting. 0:04:57.600 --> 0:05:00.360 And you know, I've always felt that the shares, for 0:05:00.520 --> 0:05:02.600 all of their faults, and they have many, many faults, 0:05:03.160 --> 0:05:06.599 are the only sort of true true diversifier of portfolios. 0:05:06.880 --> 0:05:09.120 Be a market does whatever it wants to do and 0:05:09.200 --> 0:05:11.200 doesn't pay a great deal of attention to the rest 0:05:11.200 --> 0:05:12.880 of you know, to the rest of the world. But 0:05:12.920 --> 0:05:16.680 I think high quality Korean and career and and and 0:05:16.680 --> 0:05:21.000 and Taiwan. You know, do make sense right now. Michael 0:05:21.000 --> 0:05:23.839 Shaw of Michael Field ASID Management. Michael, great to catch up, 0:05:24.279 --> 0:05:30.600 Thank you very much. Part of the charm of Diana 0:05:30.640 --> 0:05:34.280 Amoa of JP Morgan is not only a UBS her 0:05:34.279 --> 0:05:36.960 early work on trading desk where she enjoyed the bid 0:05:36.960 --> 0:05:40.880 walking away, but as a manager of fixed income portfolio, 0:05:41.080 --> 0:05:44.760 she's a bit aware that if yield goes up, price 0:05:45.040 --> 0:05:47.560 goes down. We're thrilled to Diana could join us here 0:05:48.080 --> 0:05:51.600 this morning on the benchmark tenure Diana, I see since 0:05:51.720 --> 0:05:55.960 early August the price is declined three percent. That's a 0:05:55.960 --> 0:05:59.200 lot of coupon. How far are we from real price 0:05:59.279 --> 0:06:04.320 decline in the barn market. Well, it really depends on 0:06:04.480 --> 0:06:08.320 what we get from these elections, UM, and then how 0:06:08.400 --> 0:06:12.600 things play out following that. In terms of US policy, UM, 0:06:12.680 --> 0:06:15.520 we have a range UM, so we had a range 0:06:15.560 --> 0:06:19.960 of point five to one percent on the tenure um 0:06:19.960 --> 0:06:23.520 over this quarter into year end, looking at various scenarios, 0:06:24.360 --> 0:06:28.800 various election outcomes. So we think that the most aggressive 0:06:28.920 --> 0:06:32.640 end UM, so that would be a blue wave of outcome. UM. 0:06:32.720 --> 0:06:36.000 Initially we could get up to one percent, but to 0:06:36.080 --> 0:06:39.200 move significantly higher than that given the headwinds that we're 0:06:39.200 --> 0:06:42.960 facing with COVID cases rising globally, and you know, as 0:06:43.000 --> 0:06:46.360 you were discussing with Europe shutting down, UM, I think 0:06:46.440 --> 0:06:50.320 that's going to be really tough, Janna. When volativity is 0:06:50.320 --> 0:06:54.640 elevated cross asset and correlations, traditional correlations start to break down. 0:06:54.960 --> 0:07:00.839 How much forced the risking takes place well in the 0:07:01.040 --> 0:07:03.000 in the in the heart of the moment, I think 0:07:03.000 --> 0:07:06.520 it depends on what kind of portfolios people have constructed 0:07:06.560 --> 0:07:11.239 and what expectations are UM. So it passed political shocks 0:07:11.320 --> 0:07:14.240 where we've had outcomes the one pricing by market. You 0:07:14.320 --> 0:07:18.000 certainly did see a significant amount of risking because markets 0:07:18.000 --> 0:07:21.560 were caught out either because polls were pointing to a 0:07:21.600 --> 0:07:26.040 different outcome than what materialized. I'd say in this particular instance, 0:07:26.160 --> 0:07:29.000 what we're seeing actually is quite the opposite, where the 0:07:29.080 --> 0:07:34.000 polls seem to be consistently pointing to UM a specific outcome, 0:07:34.080 --> 0:07:36.760 but markets are reluctant price it. Maybe because of the 0:07:36.760 --> 0:07:40.240 experiences of twenty sixteen UM and bread fit, so I 0:07:40.280 --> 0:07:43.160 would expect in this instance UM the amount of the 0:07:43.320 --> 0:07:46.240 risking would be significantly less than what we've seen in 0:07:46.280 --> 0:07:48.680 the past. Well, Diana, to build on which I was 0:07:48.720 --> 0:07:52.240 talking about Handing Kravis of KKR last week said I've 0:07:52.280 --> 0:07:55.240 been investing for over fifty years. I don't remember a 0:07:55.280 --> 0:07:58.239 time when I've seen such volatility as we see today. 0:07:58.280 --> 0:08:00.800 There seems to be ablieve that because as rates are 0:08:00.920 --> 0:08:03.840 so low, so close to the zero lower bound, that 0:08:03.960 --> 0:08:06.280 there is no haven and that people are are going 0:08:06.320 --> 0:08:08.640 to go to the same exit if there is some 0:08:08.720 --> 0:08:12.200 sort of event that transpires. Is that a sense that 0:08:12.280 --> 0:08:15.320 you have that basically the only head right now is 0:08:15.320 --> 0:08:19.760 having extra cash to be able to respond to something. Well, 0:08:19.960 --> 0:08:23.640 extra cash is definitely something that markets already seem to hold. 0:08:23.680 --> 0:08:25.600 When you look at the m m F, a function 0:08:25.640 --> 0:08:28.800 of Bloomberg which we mentioned in the past, um a 0:08:28.800 --> 0:08:31.640 lot of cash went into money market funds that went 0:08:31.680 --> 0:08:34.280 from about three point six trillion four point eight at 0:08:34.320 --> 0:08:36.600 the peak. It's still at four point three trillion, So 0:08:36.679 --> 0:08:39.760 there is a significant amount of cash already sitting in 0:08:39.800 --> 0:08:44.000 the sidelines. I'd say the frustration for investors who look 0:08:44.040 --> 0:08:48.640 at traditional sixty fourty portfolios is that treasuries haven't actually 0:08:48.679 --> 0:08:51.600 been acting as a hedge in this latest bout um 0:08:51.760 --> 0:08:55.079 of weakness. If you try and understand the logic behind it, 0:08:55.080 --> 0:08:58.600 it makes sense. You know, aggressive fisical um is one 0:08:58.640 --> 0:09:01.920 thing that would actually need repricing of cars in the 0:09:01.960 --> 0:09:04.760 back end of the US as the as the Treasury 0:09:04.760 --> 0:09:07.200 comes to find that in the market. But a failure 0:09:07.240 --> 0:09:10.640 of that to materialize with impact equities. What investors need 0:09:10.720 --> 0:09:13.680 to think of is think of what else could act 0:09:13.720 --> 0:09:18.360 as balanting portfolios. UM. So I'm unfortunate that I started 0:09:18.400 --> 0:09:20.880 my career in a margin market. So it's I can 0:09:20.960 --> 0:09:23.360 think of several things in em that could work as 0:09:23.400 --> 0:09:27.720 potential hedges on a downside scenario. UM. Looking at the 0:09:27.760 --> 0:09:30.760 option space in e M currencies could make sense into 0:09:30.800 --> 0:09:33.360 an event such as these as that has actually been 0:09:33.440 --> 0:09:38.120 working reasonably well UM in certain pairs. So it's not 0:09:38.200 --> 0:09:41.479 that it's impossible to construct portfolios, it's just that investors 0:09:41.520 --> 0:09:45.920 need to think beyond traditional hedges. Danna. We needed that 0:09:45.960 --> 0:09:48.240 downside protection. Last week in Europe, that's for sure. Some 0:09:48.320 --> 0:09:51.520 headlines coming from Chancellor Mircle speaking at a news conference 0:09:51.559 --> 0:09:54.560 in Berlin saying the following Facing a difficult winter with 0:09:54.600 --> 0:09:59.120 an aggressive virus, sites are tripling of COVID nineteen patients 0:09:59.160 --> 0:10:01.480 and intensive care and tom. This has been the story 0:10:01.520 --> 0:10:03.880 across Europe, not just in German but in the northwest 0:10:03.880 --> 0:10:07.000 of this country as well. Overwhelming the health care system 0:10:07.040 --> 0:10:09.680 was the concern back in spring, and unfortunately in Europe 0:10:09.920 --> 0:10:12.959 it's the concern all over again. Well, John, I'm called 0:10:13.040 --> 0:10:17.000 by this by outside my walk up in Manhattan to 0:10:17.080 --> 0:10:19.520 see the tents go up as they did in February 0:10:19.600 --> 0:10:23.120 Merchant April just outside Mount Sono. But to meet John. 0:10:23.200 --> 0:10:27.080 It is about hospitalization. I sided South Dakota, today's Sioux 0:10:27.160 --> 0:10:30.720 Falls with some serious hospitalization issues. What's it like for 0:10:30.920 --> 0:10:35.199 NHS and the United Kingdom? Difficult? The future hard and 0:10:35.240 --> 0:10:37.080 that's why the Prime ministers reacted the way it did 0:10:37.080 --> 0:10:40.040 over the weekend. It was very localized Tom, as I say, 0:10:40.240 --> 0:10:42.640 in the northwest of the country and cities like Liverpool, 0:10:42.640 --> 0:10:44.520 and they were hoping that they have this multi tiered 0:10:44.559 --> 0:10:47.960 system to deal with different regions. Now the forecast coming 0:10:48.000 --> 0:10:50.480 from the advisors to the Prime Minister to suggesting that 0:10:50.480 --> 0:10:53.600 that could be something that doesn't just overwhelm a single region, 0:10:53.640 --> 0:10:56.920 but overwhelms the country. This is about making sure by 0:10:56.920 --> 0:10:58.600 the time we get to Christmas is not a whole 0:10:58.640 --> 0:11:01.640 lot worse. The problem this minister has, Tom is that 0:11:01.679 --> 0:11:06.040 he was recommended by his advisers months ago, back in September, 0:11:06.120 --> 0:11:08.520 to have a two week circuit breaker, a two week 0:11:08.600 --> 0:11:11.560 lockdown to prevent us from getting to where we are now. 0:11:11.760 --> 0:11:14.280 He chose not to, and here we are the problem 0:11:14.280 --> 0:11:16.400 that many people in this country have is that if 0:11:16.440 --> 0:11:19.480 we're going to do another lockdown, what's the objective. What's 0:11:19.480 --> 0:11:21.280 the objective. Is it to get back to where we 0:11:21.280 --> 0:11:23.960 were before and actually try this track and trace system 0:11:23.960 --> 0:11:27.320 again and open up more effectively, or we're just doing 0:11:27.320 --> 0:11:29.239 this in the hope that we have a vaccine announcement 0:11:29.280 --> 0:11:31.840 tom in the next thirty five days. And I'm not 0:11:31.880 --> 0:11:33.960 gonna truils hear, but I'm going to point out the 0:11:34.000 --> 0:11:36.360 fact that these headlines from Germany are coming from a 0:11:36.440 --> 0:11:39.280 quantum chemist, and there seems to be a little bit 0:11:39.280 --> 0:11:41.760 of a different difference in the tone john from the 0:11:41.840 --> 0:11:45.880 quantum chemist versus a gentleman from ford In and maybe Wharton, 0:11:46.280 --> 0:11:49.040 and then also Prime Minister Johnson as a journalist. I mean, 0:11:49.200 --> 0:11:53.480 there's a different tone to a Merkele virus headline, very 0:11:53.559 --> 0:11:56.200 much so. But Merkele and Promister Johnson going in the 0:11:56.200 --> 0:11:59.440 same direction at the moment. Dana of Japing Morgan Investment Management, 0:11:59.520 --> 0:12:06.880 Diana than Key our team today and tomorrow, we'll try 0:12:06.920 --> 0:12:09.560 to give you as sophisticated to coverage as we can 0:12:10.120 --> 0:12:15.520 from people with authority. Brian classes On a Carlton in Minnesota. 0:12:15.720 --> 0:12:18.920 He has a cottage industry going in the United Kingdom 0:12:18.960 --> 0:12:22.120 of looking at the decline of democracy or throw the 0:12:22.240 --> 0:12:25.400 doctor class could join us this morning from u c L. Brian, 0:12:25.440 --> 0:12:29.720 you have been hugely visible and hugely articulate on the 0:12:29.800 --> 0:12:34.199 decline of democracy. Let's begin with the US. Can we 0:12:34.320 --> 0:12:39.719 staunch that and resurrect democracy tomorrow? I think we can 0:12:39.800 --> 0:12:42.120 begin to UM. I think that there has been a 0:12:42.160 --> 0:12:45.960 sustained attack on democratic institutions in the United States, and 0:12:46.000 --> 0:12:49.320 I think despite you know, being a nonpartisan expert, this 0:12:49.400 --> 0:12:51.840 has been from one side, predominantly right. So you have 0:12:52.520 --> 0:12:55.920 rhetoric coming out of the president attacking the press, um, 0:12:55.960 --> 0:12:59.800 you know, trying to scapegoat minority communities, and also most 0:12:59.840 --> 0:13:02.679 re stently around the election saying things like, you know, 0:13:03.040 --> 0:13:05.360 we can't trust the votes, even though there's evidence that 0:13:05.400 --> 0:13:08.720 we can encouraging supporters to vote twice, etcetera. So it's 0:13:08.720 --> 0:13:11.800 a long term rebuild that we're going to write because yes, well, 0:13:11.840 --> 0:13:14.079 I don't mean to interrupt, because because the time, Brian, 0:13:14.120 --> 0:13:15.960 I've got to get to this. It's too important, and 0:13:15.960 --> 0:13:18.240 you are one of the great experts on this. You 0:13:18.280 --> 0:13:21.400 are a fabric of the north uh northern part of 0:13:21.400 --> 0:13:24.040 our Midwest. Where would we go back to William Jennings, 0:13:24.040 --> 0:13:27.440 Bryan Huey Long, whatever name the other names, and of 0:13:27.480 --> 0:13:31.040 course President Trump, this is populism at hand. Do you 0:13:31.200 --> 0:13:35.920 see populism extending it reach across America? Or as you 0:13:36.000 --> 0:13:39.200 say it, with clear and direct messaging, can it be 0:13:39.400 --> 0:13:43.360 staunched like it was with Huey Long of Louisiana and 0:13:43.360 --> 0:13:46.960 what it was like it was with Jennings Bryan Well. 0:13:47.000 --> 0:13:49.440 I think reality has a way of catching up with populism. 0:13:49.480 --> 0:13:52.600 And I think what happens is often populous, often big 0:13:52.600 --> 0:13:56.440 slogans and few solutions. And what's happened recently is that 0:13:56.640 --> 0:13:59.760 the coronavirus has been reality, the economy has been reality 0:14:00.080 --> 0:14:01.760 for President Trump, and so I think there is a 0:14:01.840 --> 0:14:05.120 turn back towards people who actually understand things right, that 0:14:05.160 --> 0:14:08.520 actually understand how economies operate and how public health can 0:14:08.559 --> 0:14:10.920 be best served. And that's why you know Dr Fauci, 0:14:10.960 --> 0:14:13.760 for example, is the most widely trusted figure in the 0:14:13.840 --> 0:14:16.679 United States political system at the moment, because people are 0:14:16.720 --> 0:14:18.480 turning back to experts. So I think there is a 0:14:18.480 --> 0:14:21.480 pendulum shift that's happening in the United States. There are 0:14:21.520 --> 0:14:24.360 boards over the windows in midtown Manhattan and across the 0:14:24.400 --> 0:14:28.480 cities in the United States. This is unusual the day 0:14:28.560 --> 0:14:32.160 before an election. There is a feeling of eerieness before 0:14:32.280 --> 0:14:35.400 the storm. And my eleven year old son said to 0:14:35.400 --> 0:14:37.200 me last night, are we gonna be okay? Is it 0:14:37.280 --> 0:14:41.120 going to be violent? Is the sense of violence overstated here? 0:14:41.320 --> 0:14:44.160 Or do you get the sense, uh that the unrest 0:14:44.400 --> 0:14:49.160 just in general has that ability of potentially percolating. I 0:14:49.360 --> 0:14:51.480 I am very worried. I'm more worried than I've been 0:14:51.480 --> 0:14:54.280 about any election, certainly in my lifetime. And I think 0:14:54.360 --> 0:14:56.200 the reason for that is because there's not really an 0:14:56.200 --> 0:14:58.440 exit ramp for either side here. The stakes are so 0:14:58.600 --> 0:15:01.560 high that when we wake up on Wednesday, or potentially 0:15:01.600 --> 0:15:03.800 much further along, if we don't know the results quickly, 0:15:04.280 --> 0:15:06.760 you know around half the country is going to find 0:15:06.760 --> 0:15:10.560 this to be an existential threat because the hyperpolarization has 0:15:10.600 --> 0:15:12.720 taken such root in this kind in the United States. 0:15:13.040 --> 0:15:15.160 And I think that's something where you know, this is 0:15:15.160 --> 0:15:17.280 a longer term project. It's not going to get fixed 0:15:17.320 --> 0:15:19.520 no matter what the result is on Tuesday. And I 0:15:19.560 --> 0:15:22.040 am very worried about the prospect of if there is 0:15:22.040 --> 0:15:27.760 a contested election, especially widespread unrest. Brian speculating what happens 0:15:27.800 --> 0:15:30.080 Wednesday morning. Can we talk about what has happened and 0:15:30.200 --> 0:15:34.000 tell me whether attacking the process actually damages the process 0:15:34.080 --> 0:15:36.480 given the record turn out that we've seen so far 0:15:36.480 --> 0:15:40.920 and early voting. Yeah, so I think there has been 0:15:41.120 --> 0:15:44.000 a like a really good response here to voter suppression 0:15:44.120 --> 0:15:45.760 in the sense that you know, in Texas there are 0:15:45.840 --> 0:15:48.920 more people voting now and have already voted than in 0:15:48.960 --> 0:15:52.160 the entirety of But that being said, you know, there's 0:15:52.200 --> 0:15:54.800 also some really worrying signs. We had a foiled plot 0:15:54.840 --> 0:15:57.680 to kidnap the governor of Michigan. We've had murders at 0:15:57.760 --> 0:16:01.840 various protests. We also have the president directly endorsing an 0:16:01.880 --> 0:16:05.520 attempt to push a campaign bus from the Biden campaign 0:16:05.560 --> 0:16:08.040 off the road in Texas. So, you know, temperatures are 0:16:08.120 --> 0:16:11.360 very high, and I think that with Trump telegraphing that 0:16:11.400 --> 0:16:14.600 he might declare victory before all the votes are counted, 0:16:14.760 --> 0:16:17.240 the risks are high. You know, in in economics term 0:16:17.240 --> 0:16:19.120 we talk about tail risk. I think there's a very 0:16:19.200 --> 0:16:22.840 large tail risk here where it's it's still improbable that 0:16:22.840 --> 0:16:25.440 there's gonna be widespread unrest and violence. But it's such 0:16:25.480 --> 0:16:27.480 a damaging prospect that we have to take it very 0:16:27.560 --> 0:16:29.480 very seriously and do everything we can to stop it. 0:16:30.640 --> 0:16:32.880 Bran asked this in a really delicate way, and it's 0:16:32.880 --> 0:16:36.040 not allowed question. Why do you think those stores are 0:16:36.160 --> 0:16:38.880 boarded up? Who do they think is going to attack 0:16:38.920 --> 0:16:44.160 them come election morning, come Wednesday. Well, I think there's 0:16:44.160 --> 0:16:46.880 going to be uh, you know, the potential for violence 0:16:46.880 --> 0:16:49.240 no matter what the result is. To be honest, Um, 0:16:49.280 --> 0:16:52.240 I think that there is a series of communities that 0:16:52.400 --> 0:16:56.800 feel extremely invested in this result. And I think that 0:16:56.840 --> 0:16:59.680 you know, when you have a situation in which those 0:16:59.720 --> 0:17:02.040 fans have been flamed from people in power for a 0:17:02.120 --> 0:17:05.760 very long time. Um, the polarization is just at boiling point. 0:17:05.800 --> 0:17:08.359 It's really at boiling point. And so I think, you know, 0:17:08.520 --> 0:17:10.760 regardless of what happens, it's not just about who wins 0:17:10.760 --> 0:17:12.880 and who loses. It's also the rhetoric that I think 0:17:12.920 --> 0:17:16.160 is extremely damaging from President Trump saying that we shouldn't 0:17:16.160 --> 0:17:18.720 trust the result right months of saying the election is 0:17:18.800 --> 0:17:21.440 rigged despite evidence to the contrary. And so I think 0:17:21.520 --> 0:17:24.320 that only heightens tensions. And I think regardless of what 0:17:24.359 --> 0:17:27.000 the result is, there is a significant risk of unrest 0:17:27.040 --> 0:17:31.320 in American cities. Brant Class appreciate the time this monic. 0:17:31.359 --> 0:17:38.879 Thank you, said University College London Professor Daniel in the 0:17:38.920 --> 0:17:41.399 b MP Perry about his chief US economists and had 0:17:41.440 --> 0:17:44.679 a macro strategy there and far more importantly, he's one 0:17:44.680 --> 0:17:49.000 of our best best thinkers of the set of outcomes forward. 0:17:49.440 --> 0:17:52.159 He has made real clear that we have a chance 0:17:52.200 --> 0:17:56.000 to be in the uncharted, the uncharted territory of many 0:17:56.080 --> 0:18:00.200 different outcomes, Daniel, in which is the uncharted territory you're 0:18:00.240 --> 0:18:04.320 most focused on right now? Well, there are are a 0:18:04.320 --> 0:18:09.320 lot of potential terra incognita places that we can go 0:18:09.400 --> 0:18:12.800 in this very unprecedented election. Uh, it's clear that we 0:18:12.840 --> 0:18:17.600 have seen a fairly uh norm breaking president. But what 0:18:17.640 --> 0:18:21.879 I'm most worried about is come January, there's still no 0:18:22.000 --> 0:18:26.080 clear picture as to who the president of the United 0:18:26.119 --> 0:18:29.560 States is. Uh, and both Joe Biden and Trump show 0:18:29.680 --> 0:18:32.760 up claiming that they are the legitimate president. Well, within 0:18:32.800 --> 0:18:36.400 that outcome, which I'm gonna call suitably gloomy, So it's 0:18:36.480 --> 0:18:39.800 January and we really don't know where we are. Certainly 0:18:39.840 --> 0:18:44.040 there's some form of tension and contested as well. What 0:18:44.119 --> 0:18:46.480 does that do to the economy. Is there a run 0:18:46.560 --> 0:18:49.760 ray to this economy right now where it can sustain 0:18:49.960 --> 0:18:55.960 that political shock? That is the trillion dollar question. Um. 0:18:56.000 --> 0:18:59.919 I think Tom, that the implications of something like that 0:19:00.000 --> 0:19:04.720 are just so unfathomably profound that it's hard not to 0:19:04.760 --> 0:19:07.359 believe that that's going to have a pretty dramatic effect 0:19:07.640 --> 0:19:11.160 upon markets and the economy. So I really hope that 0:19:11.200 --> 0:19:13.359 we don't get there, um, And I think we do 0:19:13.520 --> 0:19:16.679 have a lot of ways that we can avoid the 0:19:16.840 --> 0:19:21.520 slope toward a constitutional crisis. But if we get there, 0:19:21.560 --> 0:19:25.240 we'll just have to wait and see. What's your view 0:19:25.240 --> 0:19:26.920 on how the market is pricing a lot of this, 0:19:26.920 --> 0:19:28.600 This narrative is all over the place. It's like a 0:19:28.600 --> 0:19:31.160 pendulum from one extreme to the other. A few months back, 0:19:31.160 --> 0:19:33.320 it was a worry about a contested election. A few 0:19:33.359 --> 0:19:36.359 months forward it is the blue wave and pricing that in, 0:19:36.520 --> 0:19:39.040 and then all over again a week going into the election, 0:19:39.080 --> 0:19:44.520 we start talking about contested again. Dan, where's that coming from? Yeah, 0:19:44.560 --> 0:19:47.280 I think it's because the sticks are just so high, 0:19:47.520 --> 0:19:51.919 and Um, the outcomes are just so extreme on on 0:19:52.000 --> 0:19:55.719 either direction, um, When really what we're seeing here is 0:19:55.760 --> 0:19:58.119 just a shift in the polls of you know, a 0:19:58.160 --> 0:20:00.400 couple of points here, a couple of points there. I mean, 0:20:00.560 --> 0:20:03.439 what really is striking about this selection is actually just 0:20:03.480 --> 0:20:06.880 how stable it has been. Joe Biden has always led 0:20:06.920 --> 0:20:10.359 to Donald Trump by anywhere from nine from from six 0:20:10.440 --> 0:20:14.280 to to ten points. I mean, that's those aren't insignificant numbers, 0:20:14.480 --> 0:20:17.560 but compared to the pretty wild swings that we saw 0:20:17.560 --> 0:20:22.119 in sixteen, it's actually, Um, the main feature of this 0:20:22.200 --> 0:20:28.000 election is stability. And yet um, people modern markets extrapolate 0:20:28.119 --> 0:20:31.320 from the race tightening a bit to the race widening 0:20:31.359 --> 0:20:34.000 of bit and and they say this is either going 0:20:34.080 --> 0:20:37.680 to be a DEM sweep or or a contested, close, 0:20:37.760 --> 0:20:41.240 messy election. And by the way, Um, the fact that 0:20:41.480 --> 0:20:44.560 the election is going to be contested, um, is different 0:20:44.720 --> 0:20:48.760 from the election actually being close, messy and chaotic. It's 0:20:48.760 --> 0:20:52.360 almost certain that President Trump is going to contest the results. 0:20:52.600 --> 0:20:54.600 He may contest the results even if he is won, 0:20:55.040 --> 0:20:58.560 as he does as he had done in Steen. Um. 0:20:58.600 --> 0:21:01.720 But the real question is this is going to be 0:21:01.800 --> 0:21:05.280 close enough that there's a legitimate case to be made 0:21:05.760 --> 0:21:09.560 that are recounting or one of these election lawsuits can 0:21:09.600 --> 0:21:13.240 actually swing the difference. Well, Dan, you now did. Though, 0:21:13.320 --> 0:21:15.360 let's just sit on the markets for a moment. We're 0:21:15.400 --> 0:21:18.960 extrapolating out yesterday's price action. Whatever yesterday or last week's 0:21:18.960 --> 0:21:22.680 price action actually was that pendulum swinging some aggressively despite 0:21:22.680 --> 0:21:25.679 the fact polls have been really, really stable DWN. That 0:21:25.760 --> 0:21:27.560 just screams to me that no one has a clue 0:21:27.800 --> 0:21:30.600 what's going on. So Wednesday morning, even if we do 0:21:30.680 --> 0:21:32.600 get a result and we know what that result is, 0:21:32.840 --> 0:21:36.080 we're just gonna extrapolate out last hour's price action without 0:21:36.080 --> 0:21:38.640 really thinking about what any of the stuff means over 0:21:38.680 --> 0:21:43.520 the medium term. Well, no, I think that come election day, 0:21:43.600 --> 0:21:47.240 or rather the morning afterward, UM, there is a set 0:21:47.240 --> 0:21:51.280 of scenarios where we can know pretty for sure who 0:21:51.359 --> 0:21:54.640 who the winner is, UM and UM is Therefore there 0:21:54.720 --> 0:21:57.479 there are some certain scenarios where I think markets can 0:21:57.520 --> 0:22:01.400 become pretty confident that Joe Biden is the winner. UM. 0:22:01.440 --> 0:22:03.680 I do think if Donald Trump is the winner, we 0:22:04.000 --> 0:22:06.880