Speaker 1: This is Bloomberg Surveillance because a road that's opened up
Speaker 1: now with the British decision to leave it could need
Speaker 1: to be more prosperous rope. They'll have to navigate a
Speaker 1: political crisis and they'll have to figure out who the
Speaker 1: next prime minister might be, and that's not really clear.
Speaker 1: I think we can think of it as essentially a
Speaker 1: decreasing relationship with economic distance. Bloomberg Surveillance your link to
Speaker 1: the world of economics, finance, and investment on Bloomberg Radio.
Speaker 1: Good morning. It is seven am on Wall Street and
Speaker 1: in Washington, d C. Where Tom Keene and I are
Speaker 1: presenting a special edition of Surveillance, live from the capital
Speaker 1: of the United States. Later in the program, Tom an
Speaker 1: extended interview with former FED Chairman Alan Greenspan about Brexit
Speaker 1: central banks in the American economy. Extraordinary good fortune to
Speaker 1: speak to Chairman Greenspan. You and I know he's been
Speaker 1: cautious for months. I would suggest it's even increased, as
Speaker 1: you can understand when you look at the screen this morning,
Speaker 1: Mike at seven am. You always go through the data.
Speaker 1: Why don't you do that? And I'll jump in with
Speaker 1: a few observations I'll just start with the fact equities
Speaker 1: to tier it is. Uh. It is a down trend
Speaker 1: since the UM volumes started to pick up as more
Speaker 1: people in it to their trading discs. Although um and
Speaker 1: we should notice nowon in London, so people have been
Speaker 1: trading for a while. Uh, it has been more of
Speaker 1: a grind lower, nothing like the plunge on Friday. Chancellor
Speaker 1: of the Exchequer George Osborne out today saying, uh, the
Speaker 1: government has a contingency place in plan to shore up
Speaker 1: the US UK economy, not convincing people. The pound right
Speaker 1: now at one thirty two, ten off its lows, but
Speaker 1: below Friday, and we're on a one handle watch there.
Speaker 1: I mean, the vectors are all in the wrong direction.
Speaker 1: But as Mike says, without the enthusiasm and anks that
Speaker 1: we saw on Friday, the foot Sea is down one
Speaker 1: hundred and two points right now. The volume of European
Speaker 1: shares changing hands almost three times that any day average
Speaker 1: for British equities, more than uh three times as well
Speaker 1: British banks, helping to put the European Bank Index on
Speaker 1: course for its biggest two day drop on record. It
Speaker 1: is now down by seven point two percent on the day,
Speaker 1: and you were mentioning some of the European banks. Deutsche
Speaker 1: Bank getting hammered again, down nine point four percent to
Speaker 1: twelve euros, just just over twelve euros. Let's color that,
Speaker 1: and it just breaking down to a new low twelve
Speaker 1: point one nine on euros. Let's color the trend of
Speaker 1: Deutsche Bank is a proxy for our global Wall Street audience,
Speaker 1: particularly the American audience. In drive time, down we go
Speaker 1: at five am. There was the McKey bounce, There was bounce,
Speaker 1: and then it just didn't happen, and then another bounce.
Speaker 1: Let me get my official Bloomberg surveillance cursor out here.
Speaker 1: At about six eighteen am Wall Street Time Up we
Speaker 1: go a little bit and Mike, as we go to
Speaker 1: the opening of the show, it ain't happening for the
Speaker 1: European banks. Well, let's set it up now for the
Speaker 1: rest of the markets. The stock six hundred is down
Speaker 1: by three percent right now, a little over nine points.
Speaker 1: The decks in Germany is off a hundred and eighty
Speaker 1: points one point nine percent. Here in the U S
Speaker 1: SMP features are off by fourteen seven tenths. It's the
Speaker 1: seven tenths decline for Dow futures there down one seventeen
Speaker 1: and Nasdaki Mani futures are off thirty four points eight
Speaker 1: tenths of eight percent. The Euro trading at one ten
Speaker 1: sixteen right now is down nine tenths. It's been as
Speaker 1: low as one oh nine eighty four. Will keep an
Speaker 1: eye on that. The yen one oh one sixty four
Speaker 1: is weaker still today, and that is in contrast to
Speaker 1: the Nike, which is the one major stock market in
Speaker 1: the world. It was up today by about two point
Speaker 1: four percent, three hundred and fifty seven points ten ure
Speaker 1: no yield in the United States one point four seven percent,
Speaker 1: the five year one even and fifty seven basis points
Speaker 1: for the two year note yield. In the United Kingdom,
Speaker 1: the two year is going for fifteen basis points. In
Speaker 1: the ten year note yield is at nine basis points.
Speaker 1: It's broken tom below one on the day. So the
Speaker 1: question is where do we go from here? Is this
Speaker 1: a tipping point into a greater global slowdown and recession.
Speaker 1: Sebastian Maloby is Senior Fellow for International Economics at the
Speaker 1: Council on Foreign Relations. Sebastian, you are raising that question
Speaker 1: of whether the whole euro Zone whether the whole EU
Speaker 1: and what that means for the global economy, Yes, thank you.
Speaker 1: My sense is really that for the UK economy is
Speaker 1: the extreme uncertainty which has only gotten worth over the
Speaker 1: weekend with term more than both political parties, not just
Speaker 1: the ruling Conservative party. Um. That that uncertainty looks like
Speaker 1: it's going to be deep and it's going to be prolonged.
Speaker 1: And I can't see any other like here than this
Speaker 1: is going to really kill corporate investment, which was already
Speaker 1: done before the vote, and that's going to have knock
Speaker 1: on consequence for the UK economy, and so I'm very
Speaker 1: pessimistic about that. I think when it comes to the
Speaker 1: Euro you've got a very determined central bank which has
Speaker 1: passed the credibility test with Greece more than once and
Speaker 1: held the system together. I think there's going to be
Speaker 1: new stresses and new challenges for the central bank in
Speaker 1: an environment where they used a lot of policy ammunition already. Um.
Speaker 1: But I think you know, you have to look at
Speaker 1: yet the Spanish vote, which the election there could have
Speaker 1: been worth. It could have produced a bigger result left
Speaker 1: wing neo Marxist um. So you need another political shock.
Speaker 1: I think within the euro Zone for this to get
Speaker 1: scary for the European Central Bank that that should reassure
Speaker 1: you a little bit. The Spanish elections, it tells you
Speaker 1: that it isn't a uniform knee jerk populist response to
Speaker 1: what's going on. Right coming off the British bird, there
Speaker 1: were as many as seven countries in the rest of
Speaker 1: the European Union where somebody or other in politics was
Speaker 1: demanding an immediate referendum to copy the British one. The
Speaker 1: question is whether those demands and those pressures UM actually
Speaker 1: produced results. I mean, will that be votes of this
Speaker 1: sort and the one vote there was schedule, which was
Speaker 1: the Spanish election. UM. Europe has sailed through relatively unscathed.
Speaker 1: Sebastian Malby with us as we begin our coverage is
Speaker 1: our Bloomberg surveillance from Washington, brought you by Investco. Investco's
Speaker 1: high conviction factor based strategies could help investors focus on
Speaker 1: a high quality, low volatility and more. Learn more and
Speaker 1: investco dot com slash high Convictions. Sebastian Mailby with us
Speaker 1: with his magnificent book on the head shown Business UH.
Speaker 1: The idea of his work UH in terms of being
Speaker 1: a finalist for the Pulitzer Prize twice, but far more importantly, Sebastia,
Speaker 1: your father, Sir Christopher, as ambassador to Germany UH and
Speaker 1: indeed ambassador to France, you have a continental UK perspective
Speaker 1: as a child, which you've always brought forward in your work.
Speaker 1: The diplomacy here is about dialogue. Well that dialogue, you know.
Speaker 1: The flinty is the word we use right now. Are
Speaker 1: we going to have a flinty dialogue that Sir Christopher
Speaker 1: never saw? I think Sir Christopher, who is now eighty
Speaker 1: years old almost held his birthday will be next week, UM,
Speaker 1: is feeling a bit depressed that his life's work of
Speaker 1: British diplomacy and integration where the rest of the world
Speaker 1: hasn't been delta a very severe setback. UM. I think
Speaker 1: that the problem right now is not whether it's flinty
Speaker 1: or whatever. It's just that there's no not going to
Speaker 1: be any dialogue initially because the interlocutors have no idea
Speaker 1: what they're gonna say. The kind of disarray politically within
Speaker 1: the Leaf camp in Britain is so deep that they
Speaker 1: didn't know what they want do. They want to have
Speaker 1: more migration on a points based system, which is what
Speaker 1: bit of you know, open to the world side of
Speaker 1: their movement wanted or do they want less migration? Do
Speaker 1: they want you know, are they going to take the
Speaker 1: budget savings from sending money to Brussels and spend it
Speaker 1: on the national health service or are they going to
Speaker 1: cut government? Right? But on this Monday morning, when there's
Speaker 1: a Bloomberg headline that Ubrew will not resign, that gets
Speaker 1: my attention explained to us. European federalism. This is not
Speaker 1: Alexander Hamilton's is it. Yeah. I mean the paradox of
Speaker 1: European federalism is that really nobody wants it anymore. Um
Speaker 1: uh you know, I mean the political temperature in Europe
Speaker 1: has gone against it completely. But there's still a kind
Speaker 1: of technocratic logic that says, when you've got a single
Speaker 1: currency for nineteen of the countries, um, they need to
Speaker 1: integrate fiscally, they need to coordinate tax eave and spending
Speaker 1: and bank paid out funds and so forth. And that
Speaker 1: pushes the system towards deeper integration, even when politically it's toxic.
Speaker 1: Can it be done or can you? I guess the question?
Speaker 1: And this is a longer question. We've all got a
Speaker 1: minute left here before we have to take a break.
Speaker 1: We'll come back and explore this even more death, But um,
Speaker 1: can the integration of Europe on a trade and business
Speaker 1: basis continue as it is? Or do they have to
Speaker 1: do something like go back to individual currencies so that
Speaker 1: they don't have this physically important question. You can't go
Speaker 1: forward and you can't go back. I mean, that's the
Speaker 1: truth of it. Exiting the Euro once you've denominated every
Speaker 1: single contract in your economy and euros is so catastrophically
Speaker 1: painful that Greece looked at that and decided not to
Speaker 1: do it. I did it twice, so I mean going
Speaker 1: back out of the Euro is prohibitively painful, but going
Speaker 1: forward into integration is not something people are ready to do.
Speaker 1: So I mean we're stuck, and that is I mean,
Speaker 1: I think that the upshot of that is a long
Speaker 1: period of muddle and slow growth in sort of the
Speaker 1: Japanization of the Ursine. Well, we'll come back with Sebastian Melboy.
Speaker 1: I was gonna put a very blunt question to you, Sebastian,
Speaker 1: which I'll hold until we come back. Tom Keene and
Speaker 1: I are live in Washington, d C a special edition
Speaker 1: of Bloomberg Surveillance today as we keep track of what
Speaker 1: is happening in the United States and around the world
Speaker 1: post brexit. Tom Peter dear Terris from our data team
Speaker 1: has a fascinating bit of information here. The last time
Speaker 1: the pound was at this level in the SMP was
Speaker 1: one eight three. Well, that would be a bear market
Speaker 1: if we got back to that. We have the vectors
Speaker 1: in the wrong direction, folks. Not the panic that we've
Speaker 1: seen is today futures negative thirteen to futures negative one
Speaker 1: twelve from Washington, Bloomberg Surveillance. All right, let's check in
Speaker 1: with Michael Bart now and get the latest world in
Speaker 1: national headlines. Mike, Tom, thank you very much. British Prime
Speaker 1: Minister David Cameron will addrest Parliament today. Last week's vote
Speaker 1: for Britain to leave the European Union has left the
Speaker 1: UK looking rudderless. The attempt by opposition Labor Party lawmakers
Speaker 1: to throw their leader, Jeremy Corban out comes on the
Speaker 1: heels of Prime Minister Cameron announcing he will step down
Speaker 1: by October. A new round of flooding is possible in
Speaker 1: West Virginia and the same area where at least twenty
Speaker 1: five people died in the past week. More heavy rains
Speaker 1: are forecast and that has prompted a flash flood of
Speaker 1: watch for more than twenty counties. Firefighters advanced on the
Speaker 1: wildfire in central California that has killed two people and
Speaker 1: destroyed about two hundred homes. Find your officialsy The blaze
Speaker 1: that has charted about sixty eight square miles is about contained.
Speaker 1: Global news twenty four hours a day, powered by more
Speaker 1: than twenty hundred journalists and analysts and more than a
Speaker 1: hundred twenty countries and Michaelabar. This is Bloomberg. Mike, Tom
Speaker 1: and Michael, thanks so much, Thank you so much for
Speaker 1: your comments of our work over the weekend. Michael and
Speaker 1: I really appreciate that we are in Washington later this
Speaker 1: earning a conversation with Alan Greenspan. This is Bloomberg Surveillance.
Speaker 1: At nine am this morning, the former FITE chairman will
Speaker 1: join Tom and many from this Bloomberg special edition Washington,
Speaker 1: d C. Live on Bloomberg Radio, worldwide global business news
Speaker 1: twenty four hours a day, at Bloomberg dot com, the
Speaker 1: Radio plus mobile app, and on your radio. This is
Speaker 1: a Bloomberg Business Flash and I'm Karin Moscow. This updates
Speaker 1: brought to you by National Railty Providers of Satisfaction guaranteed
Speaker 1: New York City realty investments. See them at n r
Speaker 1: i A dot net. Mettronics says it'll buy Hardware International
Speaker 1: of Framingham, Massachusetts for about one point one billion dollars.
Speaker 1: Shares of European banks are trading lower this morning following
Speaker 1: Thursday's historic vote for the UK to leave the European Union.
Speaker 1: UK domestic banks are leading declines in the stock six
Speaker 1: hundred as analysts on both sides of the Atlantic cut
Speaker 1: earnings estimates for the biggest investment banks on the expectation
Speaker 1: that security sales and major deals will be thwarted by
Speaker 1: economic and political uncertainty and currency swings. Again. Stocks in
Speaker 1: Europe are lower, with the DACKS in Germany down two percent,
Speaker 1: CAP in Paris down one point nine percent, foot see
Speaker 1: one down one point six percent. U stock index futures declining,
Speaker 1: with SNP emny futures down fifteen points, DOW EMNY futures
Speaker 1: down one D twenty six, and NAS documity futures down
Speaker 1: about thirty seven ten year treasury of twenty six thirty seconds,
Speaker 1: the yeld one point four six percent. Nimex screwed oil
Speaker 1: down one percent or forty seven cents to forty seven nineteen.
Speaker 1: A barrel comes gold up a ten percent or ten
Speaker 1: dollar seventy cents to thirteen thirty three ten announced the
Speaker 1: euro a dollar ten o four, the British pound a
Speaker 1: dollar thirty two oh six, the yen one oh one
Speaker 1: point six two. As a Bloomberg Business Flash, Tom and
Speaker 1: Mike Karen, thanks so much. Michael McKee and Time Keenan
Speaker 1: Washington will be speaking later today with Madeline Albright and
Speaker 1: also with Alan Greenspan. Right now, Bastian Mallaby and the
Speaker 1: spirit of his hugely awaited book of October the man
Speaker 1: who knew the life and times of Alan Greenspan uh
Speaker 1: and with agreement with his publisher, will not speak in
Speaker 1: detail about the book. They're keeping that under wraps. I
Speaker 1: guess we could ask a Sebastian who will play Alan
Speaker 1: Greenspan in the movie, but let's keep that. Let's keep
Speaker 1: away from that, Sebastian. Are central bankers today different? Have
Speaker 1: they moved on to a new process that is removed
Speaker 1: from the older bankers? Sorry, which I was trying to
Speaker 1: say that that you maybe Utah could play Alan Greenspan
Speaker 1: in the meat. I don't. I'm too tall and my
Speaker 1: clarinet and my yes, that's true, that's true. I'm prescient
Speaker 1: lee unintelligible, but I don't play clarinet like the German.
Speaker 1: Are the bankers today, Sebastian, Are they a whole new
Speaker 1: breed because of newsflow globalization of finance? Is it just
Speaker 1: a whole new game? Well, I mean relative to back
Speaker 1: when Alan Greenstein was starting out his public life in
Speaker 1: the late sixties. Yes, absolutely. I mean, you know, he
Speaker 1: became Nixon's advisor in the late sixties at a time
Speaker 1: when the dollar was picked to gold, there were no
Speaker 1: financial derivatives, banking was regulated, interest rates were capped, we
Speaker 1: had regulation Q. And then during his public life of
Speaker 1: four decades, you go right up to the eve of
Speaker 1: the financial crash in two thousand and seven eight and so,
Speaker 1: if you want to understand the making a modern finance,
Speaker 1: and he's the guy who was at the center more
Speaker 1: than anybody else. He for years and I covered him
Speaker 1: for years, was insistent on the ability to use human
Speaker 1: discretion in deciding what monetary policies should be. And even
Speaker 1: physical reactions to downturns. Is that still a viable theory,
Speaker 1: or there's a big move to try to push for
Speaker 1: rules based policy making. Is green spans still the best
Speaker 1: way too to make policy? Well, you know here, I'm
Speaker 1: gonna push us back onto current events in order not
Speaker 1: to bring down the theory of my publisher too much.
Speaker 1: But I think that this question about discretion and central
Speaker 1: banking maybe facing an interesting cast right now because you've
Speaker 1: had this big market shark, because you've been reporting sterling
Speaker 1: is down to you know, the lowest has been as
Speaker 1: thad years. How the central bankers respond to that? And
Speaker 1: my guess is that there's some overt um, you know,
Speaker 1: a sort of lender of last resort liquidity provision trying
Speaker 1: to stabilize all those banks whose shares have been falling today,
Speaker 1: as you've been saying. So that's the thing that they're
Speaker 1: kind of quite open about. There's also going to be
Speaker 1: I think some exchange rate management, which they may not
Speaker 1: be quite so open about because you created one way
Speaker 1: bet for traders as you're obviously defending a level, so
Speaker 1: there may be some covert decent of levels going on.
Speaker 1: The Swiss Central Bank is the only one I'm aware
Speaker 1: of that's been open and saying it's trying to prevent
Speaker 1: the Swiss rank from appreciating too much. But when you
Speaker 1: see the Japanese yen uh, you know, falling today as
Speaker 1: opposed to rising, I mean I immediately imagine that you know,
Speaker 1: that's the Bank of Japan acting. Well. You you end
Speaker 1: up then with the fiscal authorities who are refusing to act.
Speaker 1: So to take us back to Europe and the question
Speaker 1: I wanted to ask you before the break, has the
Speaker 1: Eurozone failed? I mean I think it's it's it's a
Speaker 1: fail yet it's failed um and it's locked countries into
Speaker 1: this rigid strait jacket where you know, Greece needs a
Speaker 1: totally different interst rate structure than what Germany wants, and
Speaker 1: Grease can't get out of it now. The problem is
Speaker 1: that you know, getting out is even more painful, and
Speaker 1: so I think Europe has to live in this straight jacket,
Speaker 1: uncomfortable though it is, and I just don't see I
Speaker 1: don't see an alternative to a painful, slow grind of
Speaker 1: muddling through. This just going to be quite depressing. Sebastian.
Speaker 1: I was in Mayfair the other day after the referendum.
Speaker 1: Looking at non hedge fund people, you are the authority
Speaker 1: on this, your wonderful book More Money than God is
Speaker 1: a hedge fund game over. You know. I also with
Speaker 1: with a bunch of very smart hedge fund people right
Speaker 1: on the day before the vote, in the day of
Speaker 1: the result, UM and everybody expected, especially when Sterling was
Speaker 1: rising on the Thursday of the vote, that you know,
Speaker 1: this is a done deal. We were going to vote
Speaker 1: to stay in. And the shock the next morning was
Speaker 1: quite probable. Of course, those smart people have got a
Speaker 1: scenario for even stuff they don't expect, so I think
Speaker 1: it was quite remarkable to see people, you know, I'm
Speaker 1: at a conference. People were still you know, showing up
Speaker 1: to the events. They were trading, but they kind of
Speaker 1: had their strategy fixed assance. They didn't have to do
Speaker 1: much more than just press the hit buttons, the sund button.
Speaker 1: I get different opinions, you know, when I to my
Speaker 1: friends in the industry as to whether the markets, whether
Speaker 1: the whether the industry is um in some sort of
Speaker 1: serious decline. I mean, I think, what's care is it
Speaker 1: in a low interest rate environment where you know, returns
Speaker 1: on most assets are going to be very low you're
Speaker 1: doing pretty well if you're making six seven percent a year,
Speaker 1: and yet that doesn't support the two and twenty traditional structure.
Speaker 1: If you take two of the seven right off the bat,
Speaker 1: and then you take the of the of the remainder
Speaker 1: the hedge fund deal with the outside exact partner, that
Speaker 1: has to be renegation. And I think that's why pressure
Speaker 1: on the on the industry. I will be with the
Speaker 1: Counsel of Foreign Relations, among other gifts again in his
Speaker 1: book The Man Who Knew The Life and Times of
Speaker 1: Alan Greenspan, Eagerly it waited for the Fall. Michael McKee
Speaker 1: and Tom Keane, we are in Washington, a conversation later
Speaker 1: with Alan Greenspan. Good at Morning, Littlebert Surveillance brought you
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