WEBVTT - Global Bond Turmoil Amid German Spending and Uncertain US Policy 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.040 us live on YouTube. 0:00:27.360 --> 0:00:31.360 Steve chivone with us with federated Aaron as thrilled he 0:00:31.400 --> 0:00:33.880 could be with this. You were just down in San Diego, Steve, 0:00:34.360 --> 0:00:37.920 talking to people trying to make decisions on asset alloccasion. 0:00:38.240 --> 0:00:39.960 How miserable are people. 0:00:41.600 --> 0:00:45.640 Worried? You know, I think you've got and Frank, I 0:00:45.640 --> 0:00:48.240 don't mean to be callous about it, but it makes 0:00:48.280 --> 0:00:52.040 me like the market set up better today, ironic, given 0:00:52.080 --> 0:00:54.959 the newsflow we just heard that than where we were 0:00:55.040 --> 0:01:00.639 last November. The expectations set last November was unfulfillable. Where today, 0:01:00.800 --> 0:01:02.840 you know, we've got a healthy wall of worry around 0:01:02.840 --> 0:01:08.200 resurgent inflation, hawkish fed tariffs policy, and I think that 0:01:08.200 --> 0:01:09.960 that wall of worry is going to get knocked down 0:01:10.040 --> 0:01:12.480 or taken down brick by brick as we get in 0:01:12.480 --> 0:01:14.720 the second half of the year. So more pain to come, 0:01:15.120 --> 0:01:16.920 but we see a much much better second. 0:01:16.720 --> 0:01:19.800 Half Tursan Slack moments ago with Apollo just put out 0:01:19.800 --> 0:01:24.640 the states affected by terrorists. It's the usual victims of Michigan, Texas. 0:01:24.920 --> 0:01:29.000 I feature Nebraska is today, Indiana, Kentucky is MAG seven, 0:01:29.120 --> 0:01:33.880 Steve chiveron as the technology excellence of growthy federated or 0:01:33.959 --> 0:01:36.240 MEZ is it affected by tariffs. 0:01:37.880 --> 0:01:41.520 It's not necessarily affected by tariffs in an extraordinary way. 0:01:41.640 --> 0:01:44.120 I mean, there is certainly some effects that relates to 0:01:44.200 --> 0:01:46.680 chips and things of that nature. But if you think 0:01:46.680 --> 0:01:49.240 about it, if you were going to retaliate against the 0:01:49.360 --> 0:01:52.360 United States, you really can't do it in a general 0:01:52.400 --> 0:01:56.200 economic sense. Right if you're Canada or Mexico, where exports 0:01:56.240 --> 0:01:59.520 represent twenty five or a third of your GDP and 0:01:59.880 --> 0:02:03.320 the US those imports maybe three or four percent, you're 0:02:03.360 --> 0:02:06.920 not winning that battle. Your only leverage if you are 0:02:07.360 --> 0:02:10.200 a foreign country trying to retaliate against the United States 0:02:10.520 --> 0:02:12.600 is to try to go after the MAG seven where 0:02:12.639 --> 0:02:14.600 fifty percent of the revenue for some of those names 0:02:14.639 --> 0:02:17.520 are overseas, and so I think they are the obvious 0:02:17.560 --> 0:02:20.440 retaliation target if we're going to go down that route. 0:02:21.639 --> 0:02:24.840 Steve, what are we doing with asset allocation these days? 0:02:24.840 --> 0:02:27.200 That we sit back and we had such outperformance by 0:02:27.200 --> 0:02:30.440 the equity markets in twenty three and twenty four. What 0:02:30.480 --> 0:02:32.440 are we doing with asset allocation these days? 0:02:32.960 --> 0:02:36.280 Yeah. Look, I think what we're in is a fog 0:02:36.280 --> 0:02:39.280 of uncertainty, which is what we're calling it, and it's 0:02:39.320 --> 0:02:42.720 an economic slowdown in this first part of the year. However, 0:02:43.400 --> 0:02:46.680 I think inflation concerns are overblown, particularly because the risks 0:02:46.760 --> 0:02:49.120 to growth I think are greater than the risks to inflation. 0:02:49.919 --> 0:02:53.320 I really don't care what Chairman Powell has to say. 0:02:53.400 --> 0:02:55.640 This FED is cutting and I think they may be 0:02:55.680 --> 0:02:58.560 cutting by the middle of the year. I think tariffs, 0:02:58.600 --> 0:03:00.920 for all of the concern Paul, we are going to 0:03:01.040 --> 0:03:04.800 end up essentially with the United States instituting a tariff 0:03:05.080 --> 0:03:08.280 level equal to the world's vats. I think trade barriers 0:03:08.280 --> 0:03:10.320 are going to come down with resident from the tariffs, 0:03:10.639 --> 0:03:12.640 and you're going to see US barriers get up to 0:03:12.720 --> 0:03:15.120 about the level of a VAT. That's not the end 0:03:15.160 --> 0:03:17.600 of the world. You're going to get to a tax 0:03:17.639 --> 0:03:20.720 top package somewhere between Memorial Day and the fourth of July. 0:03:21.360 --> 0:03:22.880 And I think in the back half of the year 0:03:23.000 --> 0:03:26.200 you're going to see cyclicals small caps and the short 0:03:26.280 --> 0:03:29.919 end of the curb rally. I'm not smart enough, clever enough, 0:03:30.040 --> 0:03:32.720 or quick enough to try to get defensive today and 0:03:32.720 --> 0:03:35.240 get bullish tomorrow. We're going to invest for that better 0:03:35.240 --> 0:03:35.760 second half. 0:03:36.000 --> 0:03:38.640 Stay Chiver on one final questionnaire. I think it's really 0:03:38.680 --> 0:03:43.880 really important. The conservative client, they got a retirement plan, 0:03:43.920 --> 0:03:46.000 They're like swingey, it's a five oh one. K the 0:03:47.040 --> 0:03:48.400 things on steroids? 0:03:48.760 --> 0:03:49.800 Do they do something? 0:03:49.840 --> 0:03:50.040 Here? 0:03:50.240 --> 0:03:52.880 I got to do something. I just the newsflow. I 0:03:52.920 --> 0:03:55.840 can't take it. Lisa Matale gave me my first gray hair. 0:03:56.040 --> 0:03:58.760 What do I do? I mean, what's the to do 0:03:58.920 --> 0:04:01.200 list for you? Infederated here? 0:04:02.200 --> 0:04:04.960 I think for a conservative client, one of the best 0:04:05.000 --> 0:04:07.120 things you can do is put together a portfolio that 0:04:07.200 --> 0:04:12.320 generates income. You know, in my household, once a quarter, 0:04:12.840 --> 0:04:15.240 you know, we get our dividend payment on stock that 0:04:15.320 --> 0:04:18.200 we have, and we call it dividend Day. It's one 0:04:18.240 --> 0:04:20.120 of the happiest days of the year for my wife 0:04:20.240 --> 0:04:22.960 four times a year because that money comes in and 0:04:23.000 --> 0:04:25.040 we're not worried about a share price, right, We're not 0:04:25.080 --> 0:04:27.320 worried about a stock being up or down. We know 0:04:27.839 --> 0:04:30.560 that the investments that we hold generate an income, and 0:04:30.600 --> 0:04:32.560 I think for clients that are conservative or tending to 0:04:32.560 --> 0:04:36.120 get skittish, having a portfolio that produces an income that 0:04:36.200 --> 0:04:38.760 helps you to stay calm because you know that check 0:04:38.880 --> 0:04:41.920 is coming in and not overreact to share price movements, 0:04:42.160 --> 0:04:45.320 helps you stay invested, helps you stay long, and helps 0:04:45.320 --> 0:04:47.360 you not overreact to some of the noise that you're 0:04:47.360 --> 0:04:50.400 seeing in the political news flow right now. And I 0:04:50.440 --> 0:04:52.640 think that's the best thing you can do. You don't 0:04:52.680 --> 0:04:54.159 want to overreact. 0:04:54.000 --> 0:04:56.600 Okay, Steve Schiveron, thank you so much for the guidance. 0:04:56.560 --> 0:04:59.039 Cerre and folks, this is a huge issue. Will be 0:04:59.040 --> 0:05:02.000 covering us of course, and really into March. You know, 0:05:02.120 --> 0:05:04.560 get the jobs report coming up, Paul, But I'm sorry. 0:05:04.400 --> 0:05:08.040 S a location. What do we do? Some people say, 0:05:08.200 --> 0:05:14.760 do nothing. You know, we'll have to see. 0:05:15.920 --> 0:05:19.520 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:05:19.560 --> 0:05:22.719 weekday afternoons from seven to ten am Eastern Listen on 0:05:22.800 --> 0:05:26.479 Applecarplay and Android Otto with the Bloomberg Business app, or 0:05:26.640 --> 0:05:28.120 watch US live on YouTube. 0:05:28.360 --> 0:05:31.400 This is joy. I had absolutely nothing to do with this. 0:05:31.600 --> 0:05:35.000 I think Eric and the interns figured this out and 0:05:35.040 --> 0:05:37.720 I just want to take a moment here. People on 0:05:37.760 --> 0:05:42.640 the East coast have absolutely no clue the academic heritage 0:05:43.160 --> 0:05:47.359 of far western Canada, including the University of British Columbia. 0:05:47.440 --> 0:05:51.080 It is I learned this years ago. It is just wacko. 0:05:51.279 --> 0:05:54.720 How good the economics is. She's out of that combine, Catherine. 0:05:54.800 --> 0:05:58.800 These joins US now with pigium as well, like econometrics 0:05:59.360 --> 0:06:04.360 in aid economics. It was like absolutely definitive in my ute. 0:06:04.640 --> 0:06:07.040 Continent of Europe is what you focus on? 0:06:08.080 --> 0:06:09.000 Is it blowing up? 0:06:09.040 --> 0:06:13.080 This morning I saw Italian German spreads really didn't move. 0:06:13.560 --> 0:06:15.360 It's a one off lift. 0:06:15.320 --> 0:06:15.720 Isn't it. 0:06:16.480 --> 0:06:16.720 Yes. 0:06:16.839 --> 0:06:19.800 I think what we're seeing is in some ways a 0:06:20.279 --> 0:06:23.640 quote unquote you know, good move in an orderly move 0:06:23.880 --> 0:06:28.440 asset prices. I think markets are taking this very positively. 0:06:28.680 --> 0:06:31.440 It is you know, I see it as a third 0:06:31.480 --> 0:06:34.160 in a row of droggies, whatever it takes of the 0:06:34.200 --> 0:06:34.960 next generation. 0:06:35.120 --> 0:06:38.560 EU announcement in July twenty twenty, this is big. This 0:06:38.720 --> 0:06:39.280 is huge. 0:06:39.360 --> 0:06:39.520 This. 0:06:39.680 --> 0:06:42.000 When I first heard these numbers, I was like, this 0:06:42.080 --> 0:06:43.560 is a go big or go home number. 0:06:43.920 --> 0:06:45.320 This is a huge deal. 0:06:45.400 --> 0:06:48.719 Like you and I studied Duley Garber Folkards Lando, David 0:06:48.760 --> 0:06:53.839 Fokertslando at jointsche Bank years ago, like the deve Putin invaded. 0:06:53.920 --> 0:06:58.679 Paul Focarts Lando told me the fiscal sphere, the space 0:06:59.000 --> 0:07:02.159 in Europe will never be the same culturally. Are the 0:07:02.200 --> 0:07:08.600 institutions there, BMP, PERRYBA, this the entire structure of Europe. 0:07:08.720 --> 0:07:11.400 Are they ready for this non austerity? 0:07:12.360 --> 0:07:14.040 This is a great question. I mean, it is a 0:07:14.080 --> 0:07:14.560 big move. 0:07:14.640 --> 0:07:17.800 But one argument that I've made a long time in Europe, 0:07:18.120 --> 0:07:21.120 We're so used to having this narrative following the sovereign 0:07:21.160 --> 0:07:23.600 debt crisis, that debt is a problem in Europe. We 0:07:23.600 --> 0:07:26.600 think about Italy more recently, we think about France. But 0:07:26.680 --> 0:07:28.880 if we look at the EU as a whole, or 0:07:28.920 --> 0:07:31.560 even just the euro Area as a whole, debt to 0:07:31.640 --> 0:07:35.560 GDP is very, very low. It's much much lower than 0:07:35.720 --> 0:07:39.360 any other comparable economic region, either in size or level 0:07:39.360 --> 0:07:42.560 of development. It's at the EU level. It's eighty percent 0:07:43.240 --> 0:07:45.000 relative to GDP, so it's. 0:07:45.000 --> 0:07:45.960 Way way lower. 0:07:46.040 --> 0:07:49.920 They have loads of fiscal space. The issue for Europe 0:07:50.000 --> 0:07:53.320 is not the lack of money. The issue in Europe 0:07:53.360 --> 0:07:57.239 is not the lack of general consensus about how these 0:07:57.280 --> 0:08:00.440 funds should be spent. The problem in Europe is there 0:08:00.480 --> 0:08:05.560 is no fiscal mechanism in place to allow this spending 0:08:05.600 --> 0:08:09.239 to happen. So what is so important about this signal 0:08:09.280 --> 0:08:12.560 that we're seeing from Germany is not just the size, 0:08:12.880 --> 0:08:17.240 but what it means for Europe working together, having leadership 0:08:17.320 --> 0:08:21.360 in its largest, most economically important economy. 0:08:20.880 --> 0:08:22.280 In terms of going forward. 0:08:22.680 --> 0:08:25.880 And I think everything else, you know, provided this is 0:08:26.160 --> 0:08:29.160 planned and executed, you know properly, there are there are 0:08:29.280 --> 0:08:33.080 risks clearly around doing big stuff. I think everything else 0:08:33.160 --> 0:08:34.520 is going to fall into line. 0:08:35.240 --> 0:08:37.880 That answer just doubled my knowledge of what's going on. 0:08:37.960 --> 0:08:39.480 Oh this is much. 0:08:39.640 --> 0:08:41.720 I want you to jump in here, but I said 0:08:41.720 --> 0:08:45.080 it with leguard at Jackson Hall. Sure, people called me 0:08:45.200 --> 0:08:47.280 up and said this is a huge speech. 0:08:47.520 --> 0:08:50.520 What Catherine is that Your phone is my fault? Now 0:08:50.880 --> 0:08:54.800 hold on, let me see. Oh it's it's Air France. 0:08:57.640 --> 0:08:58.160 Available. 0:08:59.240 --> 0:09:02.440 I never this is the first time that's happened. It's 0:09:02.440 --> 0:09:08.760 your fault. What card is fired up? Oh that's we're doing. 0:09:10.080 --> 0:09:14.160 Paul saved me. But the guards fired up about that's amazing. 0:09:14.200 --> 0:09:16.520 And Catherine in your notes here, I love this. The 0:09:16.600 --> 0:09:20.679 German spending plan is a game changer, a fiscal bazooko. 0:09:20.920 --> 0:09:24.080 Earlier expectations of a two hundred million dollar defense bill 0:09:24.120 --> 0:09:27.480 were completely surpassed. So just putting in the context a 0:09:27.640 --> 0:09:30.640 huge announcement by Germany as it relates to spending, will 0:09:30.679 --> 0:09:31.520 the rest of Europe? 0:09:31.800 --> 0:09:33.560 Will they follow? And they follow? 0:09:34.720 --> 0:09:37.000 I think they're going to have to follow. I think 0:09:37.040 --> 0:09:41.160 it's going to be a multi pronged approach. We're going to, 0:09:41.440 --> 0:09:45.040 you know, get some announcements today. What I would say 0:09:45.240 --> 0:09:48.439 is a lot of these announcements coming today are. 0:09:50.080 --> 0:09:51.679 You know, these are quote unquote easy. 0:09:51.720 --> 0:09:55.040 They are politically easy, they are financially easy for them 0:09:55.120 --> 0:09:58.640 to agree. It doesn't require, for example, unanimity at the 0:09:58.679 --> 0:09:59.400 EU level. 0:09:59.679 --> 0:10:00.480 These there are. 0:10:01.160 --> 0:10:03.800 Announcements that I'm expecting today that are more in the 0:10:03.920 --> 0:10:09.520 incrementalism bucket. So if we want to see another big 0:10:09.559 --> 0:10:12.720 substantive move from here, I think what I would be 0:10:12.760 --> 0:10:17.520 looking at is one we need a signal that the EU, 0:10:17.800 --> 0:10:22.480 not Europe, but the EU is actually politically aligned and 0:10:22.559 --> 0:10:26.360 moving forward. That doesn't necessarily mean they've got to agree eurobonds, 0:10:26.760 --> 0:10:30.000 but I want to see them smash some old chestnuts 0:10:30.000 --> 0:10:32.959 here along the lines of banking union, along the lines 0:10:33.000 --> 0:10:36.400 of capital markets union, because no matter how much public 0:10:36.400 --> 0:10:39.360 money they throw at this is never going to be enough. 0:10:39.679 --> 0:10:42.520 You need private money and you need the signal the 0:10:42.600 --> 0:10:44.040 politically they're working together. 0:10:44.200 --> 0:10:46.960 I got eight questions, including how she fixes the Toronto 0:10:47.000 --> 0:10:47.560 maple leafs. 0:10:47.960 --> 0:10:51.600 Cather Nize. This is brilliant, and what I think. 0:10:51.440 --> 0:10:53.520 We need to focus on in the time we've got 0:10:53.600 --> 0:10:57.480 left is what's it mean for Americans? Because the risk 0:10:57.520 --> 0:11:00.560 here is they're eighty percent GDP? Are they going to 0:11:00.600 --> 0:11:05.320 become like us with the out of control debt and deficit? 0:11:05.400 --> 0:11:08.640 I mean, is that the fear, the pushback that Europe's 0:11:08.679 --> 0:11:09.400 going to see? 0:11:10.679 --> 0:11:15.000 That risk is always there, but there are mechanisms in place. 0:11:15.760 --> 0:11:18.800 We have these new fiscal rules at the EU level. 0:11:18.960 --> 0:11:23.760 Some people say, you know, they're not really very very stringent, 0:11:24.160 --> 0:11:26.640 but I mean think the proof is in the pudding. 0:11:26.760 --> 0:11:30.040 I mean they have been pretty effective if absolute debt 0:11:30.080 --> 0:11:33.040 to GDP is only eighty percent, So you know, my 0:11:33.559 --> 0:11:35.880 guess is they are going to handle this in a 0:11:35.920 --> 0:11:36.840 way that is constrained. 0:11:36.960 --> 0:11:39.360 Here's the guard when I was with her in Jackson Hall, 0:11:39.440 --> 0:11:43.120 this is Maynard Keynes quote. The difficulty lies not in 0:11:43.160 --> 0:11:47.640 the new ideas but escaping from the old ones. Brilliant 0:11:48.600 --> 0:11:52.160 to Paul's good question is Finland ready to escape the 0:11:52.200 --> 0:11:55.800 old ideas and become like America with a pop phenomenal 0:11:55.920 --> 0:11:57.480 GDP and all the other things. 0:11:59.600 --> 0:12:01.959 I think Europe is ready to move forward. 0:12:02.120 --> 0:12:06.920 I saw, you know, excerbs from the Munich Security conference. 0:12:07.200 --> 0:12:10.200 You know, we saw White House press conferences. I think 0:12:10.320 --> 0:12:14.720 from the perspective of Europe, this was a game changer 0:12:14.840 --> 0:12:15.320 for them. 0:12:15.720 --> 0:12:16.760 This really shifted. 0:12:16.840 --> 0:12:20.040 Going back to these German numbers. Going into the weekend, 0:12:20.080 --> 0:12:22.760 the numbers were two hundred billion for a defense fund. 0:12:22.840 --> 0:12:26.320 Only then on Monday we heard four hundred billion for 0:12:26.400 --> 0:12:30.040 a defense fund and four hundred billion for infrastructure. 0:12:30.320 --> 0:12:32.720 Then we heard five hundred million for each of those. 0:12:32.760 --> 0:12:36.320 So we grew literally in a matter of. 0:12:36.400 --> 0:12:39.200 Days, across the nation, around the world, and particularly to 0:12:39.280 --> 0:12:41.959 those of you in the continent of Europe. Katheransu us 0:12:41.960 --> 0:12:45.480 with PGM. Here a brilliant conversation. This is what surveillance 0:12:45.840 --> 0:12:48.600 is about. We welcome you on your commute across America, 0:12:48.960 --> 0:12:52.200 and of course we say good morning on YouTube. Subscribe 0:12:52.480 --> 0:12:56.240 to Bloomberg Podcast. Growing each and every day, Paul, this 0:12:56.320 --> 0:12:59.240 is I mean, this is thirty years Paul. This is 0:12:59.280 --> 0:13:01.680 a new con with doctor Nase. 0:13:01.840 --> 0:13:04.960 And Catherine talk to us about just the political support, 0:13:05.040 --> 0:13:08.840 the popular support. Isn'tre that support out there across Europe 0:13:08.840 --> 0:13:12.240 for this new way of thinking about spending and maybe 0:13:12.760 --> 0:13:15.200 having to take a bigger role in defending themselves and 0:13:15.240 --> 0:13:17.240 what that costs. 0:13:17.080 --> 0:13:20.440 Well, I think it tells you a lot, you know, 0:13:20.480 --> 0:13:22.040 about where we find ourselves. 0:13:22.080 --> 0:13:22.400 Now. 0:13:22.880 --> 0:13:24.720 If you said we need. 0:13:24.559 --> 0:13:28.320 To increase this defense spending with one for one cuts 0:13:28.360 --> 0:13:31.800 in the social safety network, I think you're going to 0:13:31.880 --> 0:13:34.560 come up against a lot of resistance, which is why 0:13:34.600 --> 0:13:38.160 we've ended up where we are, where the easiest flex 0:13:38.240 --> 0:13:45.040 point has been increasing debt and doing this through debt financing, 0:13:45.520 --> 0:13:49.200 because there is that resistance. But I think the reality 0:13:49.400 --> 0:13:54.080 is is that over the course of time, slowly some 0:13:54.280 --> 0:13:58.680 of this social welfare network is going to need to 0:13:58.720 --> 0:14:00.559 be rained in. And it comes by to your point 0:14:00.600 --> 0:14:04.400 about debt sustainability. So you know, for now this is 0:14:04.480 --> 0:14:07.600 this extra you know, slodge of money over and above, 0:14:07.720 --> 0:14:10.719 but ultimately is going to have to come at the 0:14:10.760 --> 0:14:11.480 offset of something. 0:14:11.559 --> 0:14:13.800 The ambiguity here and this goes back to Stigler's posts, 0:14:13.880 --> 0:14:16.360 not as Nobel Prize, but Stigler's looking at the little 0:14:16.400 --> 0:14:19.640 g the growth rate here, the American bargain has always 0:14:19.640 --> 0:14:22.960 been we will grow our way out of our debt. 0:14:23.320 --> 0:14:27.360 Do you see a new nominal GDP, whatever the mix 0:14:27.400 --> 0:14:30.320 of it is in Europe where they become more like 0:14:30.440 --> 0:14:33.600 America and they get the little g to cover for 0:14:33.680 --> 0:14:34.760 the debt expansion. 0:14:35.360 --> 0:14:39.920 I absolutely think that this is possible. And why do 0:14:40.040 --> 0:14:43.560 I think that? Firstly, you know, demographics is not destiny. 0:14:43.640 --> 0:14:46.600 If I look at what's going on in Japan. I mean, 0:14:46.640 --> 0:14:50.240 it's remarkable Japan grew faster in the fourth quarter of 0:14:50.320 --> 0:14:53.120 last year than the United States. This is a country 0:14:53.120 --> 0:14:58.760 that's facing a significantly, you know, dramatic and dramatically different 0:14:58.760 --> 0:15:02.480 demographic headwin than the United States. And it's because they 0:15:02.560 --> 0:15:04.840 took a very long term strategic view. 0:15:05.000 --> 0:15:07.239 And they have invested. 0:15:07.320 --> 0:15:10.840 They've increased labor market participation, they've improved productivity, and so 0:15:10.960 --> 0:15:14.600 you can get growth. We're also seeing early signs in 0:15:14.640 --> 0:15:17.280 that the European periphery, on the back of these next 0:15:17.320 --> 0:15:22.480 generation EU investments, that potential growth is starting to pick up. 0:15:22.560 --> 0:15:24.800 You know, we're not talking anything huge, but you know, 0:15:24.840 --> 0:15:27.680 a tenth a couple tenths is actually nothing to sneeze 0:15:27.680 --> 0:15:31.200 at if you accumulate that over many, many years. So 0:15:31.320 --> 0:15:35.240 I don't see any reason why Europe cannot grow. Germany 0:15:35.320 --> 0:15:40.560 did actually grow on average by two percent GDP real 0:15:41.040 --> 0:15:44.840 on average every year in the decade before the financial crisis. 0:15:45.160 --> 0:15:48.360 Now they haven't grown it all since twenty nineteen. That's 0:15:48.400 --> 0:15:51.040 not normal. That's not normal. So I think there is 0:15:51.160 --> 0:15:52.440 absolutely scope for them to do. 0:15:52.560 --> 0:15:53.520 We'll get a few more in here. 0:15:53.560 --> 0:15:55.720 We've got someone who's slummed in from Germany we've got 0:15:55.720 --> 0:15:56.840 to talk to exactly. 0:15:56.880 --> 0:16:01.720 So in terms of Germany, a market viewing Germany and 0:16:01.760 --> 0:16:06.320 broader Europe now, is this increased acceptance of higher spending. 0:16:06.360 --> 0:16:11.200 Is it seen as pro growth? Does it raise inflation concerns? 0:16:10.960 --> 0:16:12.520 What are the markets telling us here? 0:16:13.360 --> 0:16:16.960 I think the market for now is working on the 0:16:16.960 --> 0:16:19.040 assumption that this is a positive for growth. 0:16:19.160 --> 0:16:20.720 I looked at a lot of. 0:16:20.760 --> 0:16:25.720 Charts today and the yield move is contained. Yes, cultural 0:16:25.800 --> 0:16:29.160 this is critical for PJUM. If if Greg Peters was here, 0:16:29.200 --> 0:16:32.440 this is the question you'd ask you the is the 0:16:32.480 --> 0:16:38.400 institutional integrity there to sustain European business so they don't 0:16:38.480 --> 0:16:40.360 disinvest or halt investment. 0:16:40.880 --> 0:16:43.720 Well, this is why I think. In addition to this, 0:16:43.920 --> 0:16:47.160 you know, big fiscal Bazooka. I want to see a 0:16:47.240 --> 0:16:51.800 strong signal from the EU level that leaders there are 0:16:51.880 --> 0:16:56.520 working in unison, that they're willing to take hard political 0:16:56.560 --> 0:17:00.200 decisions that you know, are going to go against some 0:17:00.280 --> 0:17:03.480 vested interest to move forward. I want to see that signal. 0:17:03.520 --> 0:17:05.880 We haven't seen it yet. What we're going to hear 0:17:05.920 --> 0:17:07.840 today is not that signal. 0:17:07.920 --> 0:17:09.000 It needs to be more. 0:17:09.359 --> 0:17:12.800 ECB just out of the headlines, the European Central Bank 0:17:12.880 --> 0:17:18.080 says rates are becoming meaningfully less restrictive. Is that a 0:17:18.119 --> 0:17:21.840 societal less restrictive or is that a growthiness imploding? 0:17:22.880 --> 0:17:27.320 So uh, you know you asked the great question before, 0:17:27.400 --> 0:17:28.800 what is it? 0:17:29.240 --> 0:17:31.800 What does it mean for the ECB? This is a 0:17:31.840 --> 0:17:32.600 complete flip. 0:17:32.680 --> 0:17:35.480 For so long in Europe it was really monetary policy 0:17:35.520 --> 0:17:38.680 that was leading and fiscal was lagging. And now fiscal 0:17:38.880 --> 0:17:42.000 is firmly in the driving seat, and the ECB is 0:17:42.040 --> 0:17:43.280 going to have to adjust to that. 0:17:43.800 --> 0:17:45.200 I think at the margin. 0:17:44.880 --> 0:17:47.600 Here it's going to raise there or at least put 0:17:47.640 --> 0:17:50.240 them at the top end of neutral. So yes, I 0:17:50.840 --> 0:17:54.240 was expecting this cut today. I think they probably will 0:17:54.320 --> 0:17:57.480 cut one more time, maybe later this year, but that 0:17:57.600 --> 0:18:01.120 they sit at that top end of neutral of two 0:18:01.160 --> 0:18:04.000 point two five percent by the end of this year, 0:18:04.119 --> 0:18:06.040 so they are going to be more cautious, and of 0:18:06.080 --> 0:18:08.639 course they need to see what this all means for 0:18:08.680 --> 0:18:11.240 the real economy, and it will take time. Right, this 0:18:11.280 --> 0:18:13.919 stuff's not shovel ready. It's not going to impact on 0:18:14.000 --> 0:18:15.120 GDP on day one. 0:18:15.359 --> 0:18:18.199 This is one of Alketzani's from London, visiting today with 0:18:18.320 --> 0:18:19.479 Pgium Fixed Income. 0:18:20.000 --> 0:18:23.880 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:18:23.920 --> 0:18:27.240 starting at seven am Eastern on Applecarplay and Android Auto 0:18:27.359 --> 0:18:30.320 with the Bloomberg Business app. You can also listen live 0:18:30.400 --> 0:18:33.960 on Amazon Alexa from our flagship New York station. Just 0:18:34.000 --> 0:18:36.560 say Alexa Play Bloomberg eleven thirty. 0:18:36.760 --> 0:18:40.000 I'm cut to the chase at Latour de Jent this 0:18:40.080 --> 0:18:44.840 afternoon at lunch in Paris, overlooking the brand spankin New 0:18:44.920 --> 0:18:48.480 Notre Dame. You're going to have a fancy lunch with 0:18:48.600 --> 0:18:53.000 seasonal duckling on we go to the Crape Mademoiselle. What 0:18:53.080 --> 0:18:56.760 are the fancy people of Europe think of this world 0:18:56.840 --> 0:18:57.840 turned upside down? 0:18:58.840 --> 0:19:02.240 How well had differently? There is a lot on the plate, 0:19:02.320 --> 0:19:06.160 and what we see is on one side, some countries 0:19:06.200 --> 0:19:10.920 that have the FISCUS place to googleld notably polland Germany. 0:19:11.400 --> 0:19:14.560 Some other said that not so. Macron probably now is 0:19:14.600 --> 0:19:17.399 taking the lead. And this is something that honestly it 0:19:17.560 --> 0:19:21.040 was back at twenty seventeen when it said we really 0:19:21.080 --> 0:19:24.800 need in Europe to speed up and get some defense spending. 0:19:24.880 --> 0:19:28.399 So probably it's going to lead the queue and we 0:19:28.480 --> 0:19:32.919 will get there. I don't know how much and how fast, 0:19:33.600 --> 0:19:35.000 but this is the final destination. 0:19:35.320 --> 0:19:38.560 I mean, this is a c change for yes, both 0:19:38.680 --> 0:19:42.320 the US and Europe broader to find if there's going 0:19:42.359 --> 0:19:46.840 to be a lesser role in the US across Europe, 0:19:46.960 --> 0:19:49.600 that means obviously the European countries need to step up more. 0:19:49.640 --> 0:19:52.159 Seen at the EU today, What does that mean for 0:19:52.240 --> 0:19:55.160 investing house That impact your investment outlook as you think 0:19:55.200 --> 0:19:57.840 about allocating capital across the globe. 0:19:58.400 --> 0:20:01.800 Well, the big question is how this is going to 0:20:01.840 --> 0:20:05.080 be financed and how this well have an impact on 0:20:05.520 --> 0:20:08.760 growth because it is a structural it is a permanent 0:20:09.040 --> 0:20:11.760 increase in expenses. And this is why I believe we 0:20:11.800 --> 0:20:15.520 are seeing the bound going to the GUIs this is 0:20:15.560 --> 0:20:19.760 what worries us at the moment. So I would say 0:20:19.800 --> 0:20:23.960 that for the time being, nothing has been approved from 0:20:24.000 --> 0:20:27.560 the Parliament in Germany. So the situation still remains quite 0:20:27.680 --> 0:20:31.679 quite fluid. So we take called staying cautious on the 0:20:31.880 --> 0:20:32.480 risks set. 0:20:32.720 --> 0:20:35.560 If you were at the guard press conference, one question 0:20:35.720 --> 0:20:37.280 would you ask the. 0:20:37.280 --> 0:20:43.119 ECB quantitative titaning? What are you going to do on that? 0:20:43.160 --> 0:20:47.200 Because on cutting rates this is something that was a 0:20:47.520 --> 0:20:48.720 consensus view. 0:20:48.800 --> 0:20:51.720 But news I. 0:20:52.520 --> 0:20:56.960 Find this absolutely extraordinary. How should the United States respond? 0:20:57.200 --> 0:21:00.320 This is all of a sudden, Europe are destiny nation 0:21:00.480 --> 0:21:05.560 for marginal investment? I mean a Monday, What do you 0:21:05.640 --> 0:21:09.959 tell American clients today of the action of the White 0:21:09.960 --> 0:21:13.440 House has changed this whole dialogue. 0:21:14.240 --> 0:21:18.240 Well, to us, it really goes back to the consequence 0:21:18.359 --> 0:21:22.560 on the other classes, so on rates, on the currency, 0:21:22.640 --> 0:21:25.720 so on the US dollar. Honestly, we are shorter the 0:21:25.760 --> 0:21:29.040 US dollar longer Europe because we do expect the US 0:21:29.160 --> 0:21:35.280