1 00:00:09,880 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jay Lee. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,480 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:32,519 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Presn't 5 00:00:32,600 --> 00:00:36,280 Speaker 1: She is in Madrid addressing the Spanish Senate before heading 6 00:00:36,280 --> 00:00:39,040 Speaker 1: to the G twenty and Argentina joining a snatch talk 7 00:00:39,240 --> 00:00:43,000 Speaker 1: China is Morunda car Hi Tong International China macro strategist, 8 00:00:43,280 --> 00:00:45,840 Speaker 1: still with us, Simon French of Panier Gordon and David 9 00:00:45,920 --> 00:00:48,280 Speaker 1: Riley of Blue Bags and Mirunda as always, thank you 10 00:00:48,280 --> 00:00:50,120 Speaker 1: for joining us. We'll go onto some of the pitfalls 11 00:00:50,159 --> 00:00:53,360 Speaker 1: for the Chinese economy. But first, what's President g in 12 00:00:53,440 --> 00:00:56,560 Speaker 1: Spain force He's actually going to sign bilateral deals? Is 13 00:00:56,560 --> 00:01:00,640 Speaker 1: he looking more at Europe as he's running the US? Well, yes, 14 00:01:01,120 --> 00:01:04,200 Speaker 1: the China has definitely been much more friendly to all 15 00:01:04,240 --> 00:01:09,560 Speaker 1: the other countries, whether it's been Japan or the European countries. Um. 16 00:01:09,800 --> 00:01:12,759 Speaker 1: If you look at things like opening Alliance access into 17 00:01:12,800 --> 00:01:15,360 Speaker 1: the insurance market just this week, um, and then also 18 00:01:15,400 --> 00:01:17,959 Speaker 1: setting up wholly on foreign enterprises. So this is she 19 00:01:18,280 --> 00:01:20,880 Speaker 1: delivering the message we're going to open up the open 20 00:01:20,959 --> 00:01:23,320 Speaker 1: up China to everyone else, and if the US wants 21 00:01:23,360 --> 00:01:25,640 Speaker 1: to be part of that, then we need to come 22 00:01:25,640 --> 00:01:27,760 Speaker 1: to an agreement of the G twenty. Okay, Mariana, how 23 00:01:27,800 --> 00:01:31,160 Speaker 1: much should we worry about the Chinese economy? So it's 24 00:01:31,200 --> 00:01:33,880 Speaker 1: it's kind of slowing down on the zone. Plus you 25 00:01:33,920 --> 00:01:36,360 Speaker 1: have these trained tensions on top of it. Yeah, I 26 00:01:36,400 --> 00:01:39,280 Speaker 1: mean you're seeing the deal leveraging campaign. I mean that's 27 00:01:39,319 --> 00:01:41,080 Speaker 1: been held off, so you're getting a bit of a 28 00:01:41,080 --> 00:01:44,400 Speaker 1: bosting out in the in the economy overall, we're expecting 29 00:01:44,400 --> 00:01:50,200 Speaker 1: money supply to rebound again. But the trade tensions obviously, 30 00:01:50,240 --> 00:01:52,800 Speaker 1: I mean, the real concern is that the US has 31 00:01:52,800 --> 00:01:57,440 Speaker 1: shifted it just from trade tariffs into basically China is 32 00:01:57,440 --> 00:02:00,120 Speaker 1: a national security risk across the board. So it's not 33 00:02:00,280 --> 00:02:03,240 Speaker 1: just you know, defense, it's not just soy beans and 34 00:02:04,000 --> 00:02:08,959 Speaker 1: the machinery that gets hit. The entire five G raising 35 00:02:09,040 --> 00:02:12,480 Speaker 1: China as a threat across the entire supply chain. This 36 00:02:12,760 --> 00:02:15,400 Speaker 1: takes it into very very different territory than just what 37 00:02:15,520 --> 00:02:17,840 Speaker 1: the trade tariffs are about. But are expecting the Chinese 38 00:02:17,840 --> 00:02:21,400 Speaker 1: to retaliate or is there anything that China can do 39 00:02:21,560 --> 00:02:26,079 Speaker 1: to allay some concerns without looking too weak. Um, well, 40 00:02:26,200 --> 00:02:29,560 Speaker 1: there's very limited without dismantling the entire sort of made 41 00:02:29,600 --> 00:02:33,000 Speaker 1: in China twenty five and the state owned lead sort 42 00:02:33,000 --> 00:02:36,320 Speaker 1: of technology development. Without dismantling that entire structure, which is 43 00:02:36,360 --> 00:02:39,519 Speaker 1: not likely and going to be a continued then there's 44 00:02:39,560 --> 00:02:42,160 Speaker 1: there's very limited action they can do. If you look 45 00:02:42,160 --> 00:02:45,320 Speaker 1: at Japan, these these arguments rumbled on sort of in 46 00:02:45,360 --> 00:02:48,800 Speaker 1: the nine eighties and nineties for years. They weren't solved 47 00:02:48,840 --> 00:02:51,760 Speaker 1: at one summit, and you had a succession of three 48 00:02:51,840 --> 00:02:56,480 Speaker 1: or one investigations, export tariffs, and a whole slew of things, 49 00:02:56,480 --> 00:02:59,400 Speaker 1: which eventually sort of they came to some accommodation, but 50 00:02:59,440 --> 00:03:03,720 Speaker 1: it was ongoing. This isn't this isn't just easily solved Brenda. 51 00:03:03,760 --> 00:03:08,520 Speaker 1: How do you feel that Europe, for example, Spain will 52 00:03:08,600 --> 00:03:12,800 Speaker 1: do a marginally increased business with China. What you know 53 00:03:12,960 --> 00:03:15,760 Speaker 1: is it sailboats to India as a sudden Mary Poppins, 54 00:03:15,840 --> 00:03:19,280 Speaker 1: I mean, what actually gets done five and ten years 55 00:03:19,320 --> 00:03:23,360 Speaker 1: from now with a resurgent China from Europe? What do 56 00:03:23,440 --> 00:03:28,000 Speaker 1: they actually do? Well? The thing is the you are 57 00:03:28,080 --> 00:03:30,760 Speaker 1: now getting China opening up, As I said, sort of 58 00:03:30,800 --> 00:03:33,799 Speaker 1: the European companies going into China has been a has 59 00:03:33,840 --> 00:03:37,040 Speaker 1: been a key theme over the last few months in retaliation. UM. 60 00:03:37,160 --> 00:03:41,040 Speaker 1: So if China tries to get Europe, if you have 61 00:03:41,120 --> 00:03:45,800 Speaker 1: the Eurasian land mass joined up and isolates the US, 62 00:03:45,840 --> 00:03:49,320 Speaker 1: then that's that's potentially sort of five ten year view. 63 00:03:49,680 --> 00:03:53,640 Speaker 1: But Europe, not necessarily. Europe has very similar complaints to 64 00:03:53,640 --> 00:03:56,800 Speaker 1: the US, UM in terms of the technology, the technology 65 00:03:56,880 --> 00:03:59,440 Speaker 1: clan spers and so they're going to have to address that. 66 00:03:59,520 --> 00:04:02,200 Speaker 1: It's not um that you know, they can't. Europe has 67 00:04:02,240 --> 00:04:04,560 Speaker 1: been resisting as much as they but not quite as 68 00:04:04,600 --> 00:04:07,560 Speaker 1: noisily as Trump. Well it may not be as noisy, 69 00:04:07,640 --> 00:04:09,840 Speaker 1: but that's right where I wanted to go. I mean, 70 00:04:10,040 --> 00:04:15,560 Speaker 1: Europe has the same complaints, headaches and fears that the 71 00:04:15,680 --> 00:04:20,800 Speaker 1: US has on China, right, M yeah. I mean the 72 00:04:20,839 --> 00:04:25,320 Speaker 1: interesting thing is there we're in a sort of bit 73 00:04:25,360 --> 00:04:27,040 Speaker 1: of an impass at the moment. But as we come 74 00:04:27,040 --> 00:04:31,000 Speaker 1: into December in in China, you've got the four anniversary 75 00:04:31,040 --> 00:04:34,000 Speaker 1: of the reform and opening up UM and you know, 76 00:04:34,120 --> 00:04:38,520 Speaker 1: a big December celebration if you like. And so the 77 00:04:38,520 --> 00:04:41,479 Speaker 1: interesting thing is whether whether China actually then moves to 78 00:04:42,040 --> 00:04:45,040 Speaker 1: you know, throw open some more of the barriers, take 79 00:04:45,080 --> 00:04:47,560 Speaker 1: down some of the sit and you sort of, you know, 80 00:04:47,600 --> 00:04:51,159 Speaker 1: take scrap the negative lists, scraps on the restrictions on 81 00:04:51,200 --> 00:04:53,880 Speaker 1: foreign business and actually makes a sort of a big 82 00:04:53,920 --> 00:04:57,800 Speaker 1: statement then, because that's that, that's a potential miranda. I'd 83 00:04:57,839 --> 00:04:59,640 Speaker 1: be remiss if I did not bring up the time 84 00:04:59,680 --> 00:05:02,520 Speaker 1: when he selection over the weekend. It was a stunning result, 85 00:05:02,560 --> 00:05:05,520 Speaker 1: as reported by Tim Colplan and our team out of 86 00:05:05,560 --> 00:05:10,279 Speaker 1: Taiwan to review this liberal regimes sort of anti China, 87 00:05:10,440 --> 00:05:13,560 Speaker 1: I guess got pounded and the old Kuman Tang from 88 00:05:13,560 --> 00:05:17,400 Speaker 1: another time in place really one big Are they the 89 00:05:17,440 --> 00:05:23,200 Speaker 1: same party we remember with Shankhai shack No, I mean 90 00:05:23,320 --> 00:05:30,719 Speaker 1: it's a very different, very different. But yes, but the yes, 91 00:05:30,760 --> 00:05:32,719 Speaker 1: I mean the the the im not su it looks 92 00:05:32,800 --> 00:05:35,800 Speaker 1: it looks on the surface like like the you know, 93 00:05:35,839 --> 00:05:39,800 Speaker 1: if you the China and Taiwanese ties are would be better. 94 00:05:40,080 --> 00:05:42,320 Speaker 1: But I don't think you should drink too much into 95 00:05:42,360 --> 00:05:44,480 Speaker 1: the local elections. It's more it's what happens at the 96 00:05:44,520 --> 00:05:58,280 Speaker 1: presidential elections. Later to get his set up for the 97 00:05:58,360 --> 00:06:00,800 Speaker 1: day of this Wednesday, I love this morning from Kitchuk's 98 00:06:01,080 --> 00:06:03,880 Speaker 1: brook Stock gen Donald Trump and Larry count Low playing 99 00:06:03,920 --> 00:06:07,360 Speaker 1: good cop bad cop on another priort pre g twenty day. 100 00:06:07,440 --> 00:06:10,120 Speaker 1: We'll get bad boy j Pound later, but I'm sure 101 00:06:10,120 --> 00:06:13,080 Speaker 1: he won't be count into submission by his boss. Joining 102 00:06:13,160 --> 00:06:15,960 Speaker 1: me here in New York is Tony Crescenzi a Pimcoe Tony. 103 00:06:16,120 --> 00:06:18,520 Speaker 1: Will it be count in submission by his boss? Is 104 00:06:18,520 --> 00:06:22,560 Speaker 1: that what's gonna happen later? Well, you never know. With 105 00:06:22,600 --> 00:06:25,440 Speaker 1: Donald Trump. We would say, though, that about the pressure 106 00:06:25,480 --> 00:06:28,440 Speaker 1: that's been put on the Fed by the administration, that 107 00:06:28,800 --> 00:06:31,800 Speaker 1: it probably won't have impact on policy in the end. 108 00:06:31,920 --> 00:06:35,039 Speaker 1: This is an institution that defends itself to the core. 109 00:06:35,680 --> 00:06:38,240 Speaker 1: It's a very collegial institution where they worked together to 110 00:06:38,279 --> 00:06:42,080 Speaker 1: provide solutions for the US economy, and so they probably 111 00:06:42,080 --> 00:06:46,720 Speaker 1: will not be deterred despite the pressures by the President. Um. 112 00:06:47,120 --> 00:06:49,159 Speaker 1: In fact, we would expect the Fed to continue on 113 00:06:49,200 --> 00:06:52,000 Speaker 1: its plan to raise interest rates in December or not 114 00:06:52,080 --> 00:06:54,599 Speaker 1: a plan, but the likelihood of a hike in December, 115 00:06:54,880 --> 00:06:58,880 Speaker 1: and probably move again in March before considering a pause, 116 00:06:58,880 --> 00:07:01,440 Speaker 1: although a pause in my arch is possible. Well, let's 117 00:07:01,480 --> 00:07:04,320 Speaker 1: talk about what youth will see in for the global economy, 118 00:07:04,320 --> 00:07:07,920 Speaker 1: the US economy, more specifically, do you see the sufficient conditions, 119 00:07:07,960 --> 00:07:11,080 Speaker 1: the economic conditions arising that the FED needs to tank 120 00:07:11,120 --> 00:07:14,520 Speaker 1: you pause. No, not yet, but it's expected to evolve, 121 00:07:14,640 --> 00:07:18,560 Speaker 1: partly because there's a fiscal cliff coming in twenty which, 122 00:07:18,600 --> 00:07:21,080 Speaker 1: by the way, it could get legislated away. It is 123 00:07:21,160 --> 00:07:24,400 Speaker 1: a it is a an election year after a biphysical cliff. 124 00:07:24,440 --> 00:07:28,200 Speaker 1: We mean that well, in twenty seventeen and twenty nineteen 125 00:07:28,240 --> 00:07:30,640 Speaker 1: there's a boost to the economy from the fiscal side 126 00:07:30,640 --> 00:07:32,600 Speaker 1: of the equation, about a half point boost to g 127 00:07:32,720 --> 00:07:36,440 Speaker 1: d P. In twenty it's about a half point decline 128 00:07:36,640 --> 00:07:39,760 Speaker 1: associated with that, plus the legged impact of monetary policy 129 00:07:40,520 --> 00:07:42,880 Speaker 1: that could make it more problematic or where the FED 130 00:07:42,920 --> 00:07:46,160 Speaker 1: should decide. Let's wait and see, and so it's highly 131 00:07:46,200 --> 00:07:50,000 Speaker 1: likely that there will be a pause in h and 132 00:07:50,000 --> 00:07:52,480 Speaker 1: and the markets then after three years of witnessing feder 133 00:07:52,520 --> 00:07:55,440 Speaker 1: rate hikes will have be able to breathe easier. But 134 00:07:55,520 --> 00:07:59,680 Speaker 1: that said, the breathing easier maybe a negative thing, because 135 00:07:59,760 --> 00:08:02,440 Speaker 1: if it in fact fuels rallies in the stock market, 136 00:08:02,520 --> 00:08:07,200 Speaker 1: fuels the decline in bond fields, fuels weakness in the dollar, etcetera, etcetera, 137 00:08:07,640 --> 00:08:09,440 Speaker 1: this will only boost the economy at a time when 138 00:08:09,440 --> 00:08:11,480 Speaker 1: the job is rate is still lower than the FED 139 00:08:11,760 --> 00:08:14,440 Speaker 1: might think is sustainable over the long run because it 140 00:08:14,480 --> 00:08:17,320 Speaker 1: can produce inflation. So the consensus view going into next 141 00:08:17,400 --> 00:08:19,160 Speaker 1: year is that we get a decentration. It is pretty 142 00:08:19,160 --> 00:08:21,000 Speaker 1: clear that you agree with that consensus. Fore whether this 143 00:08:21,080 --> 00:08:23,280 Speaker 1: real debate, of course, and there should be, is how 144 00:08:23,320 --> 00:08:25,760 Speaker 1: you want a k capital without as your backdrop? What 145 00:08:25,800 --> 00:08:27,440 Speaker 1: do you saying at him come at the moment? Well, 146 00:08:27,720 --> 00:08:30,000 Speaker 1: our our view now is that economic growth and I 147 00:08:30,000 --> 00:08:31,520 Speaker 1: say this will be between two and two and a 148 00:08:31,560 --> 00:08:34,240 Speaker 1: half percent, down from about three percent this year globally 149 00:08:34,280 --> 00:08:37,680 Speaker 1: about three percent a real GDP down from three point 150 00:08:37,760 --> 00:08:39,679 Speaker 1: three this year and three point three last year. That's 151 00:08:39,679 --> 00:08:43,800 Speaker 1: still a climate since it's an expansion above potential that 152 00:08:43,960 --> 00:08:47,480 Speaker 1: is favorable for credit instruments, favorable for equity insurance favle, 153 00:08:47,480 --> 00:08:50,440 Speaker 1: favorable for real assets such as real estate. So the 154 00:08:50,480 --> 00:08:53,160 Speaker 1: early view should be that these assets will perform better 155 00:08:53,200 --> 00:08:57,800 Speaker 1: in than in equities. For example, profit growth is expected 156 00:08:57,800 --> 00:09:01,400 Speaker 1: around ten percent. Equity prices tend to correlate with changes 157 00:09:01,400 --> 00:09:03,800 Speaker 1: in private growth didn't this year, probably because the markets 158 00:09:03,840 --> 00:09:07,000 Speaker 1: were anticipating it, but that does raise the chance that 159 00:09:07,120 --> 00:09:10,040 Speaker 1: equities will rise five to tem percent next year. Core bonds, 160 00:09:10,880 --> 00:09:13,680 Speaker 1: those that are measured against the Bloomberg bombing is aggregate. 161 00:09:13,920 --> 00:09:16,199 Speaker 1: The current yield is about three and a half and 162 00:09:16,240 --> 00:09:18,679 Speaker 1: so returns will probably be in that zone. For for 163 00:09:18,920 --> 00:09:22,040 Speaker 1: corporate credit, investment grade credit, probably in the low force 164 00:09:22,160 --> 00:09:26,520 Speaker 1: clipping coupons UH and for how you perhaps near seven percent. 165 00:09:26,600 --> 00:09:29,959 Speaker 1: But this all presumes that there will be a feeling 166 00:09:30,120 --> 00:09:33,559 Speaker 1: next year amongst investors that the expansion will continue into 167 00:09:35,120 --> 00:09:39,760 Speaker 1: THEE because sentiment matters in terms of viewpoints. Okay, well, 168 00:09:39,800 --> 00:09:43,040 Speaker 1: sentiment matters because of viewpoints. But the ideas cash is 169 00:09:43,040 --> 00:09:45,640 Speaker 1: a new asset. Twelve months ago, when we were sitting here, 170 00:09:45,720 --> 00:09:49,880 Speaker 1: cash didn't exist. Now cash exist as a tangible right. 171 00:09:49,920 --> 00:09:52,080 Speaker 1: In fact, it's why on the yield curve, when we 172 00:09:52,120 --> 00:09:54,240 Speaker 1: think of whether to be in the and I'll describe 173 00:09:54,280 --> 00:09:56,880 Speaker 1: what what I mean, the curve steepener or the curve flattener. 174 00:09:56,920 --> 00:10:00,320 Speaker 1: We like the stepener. There's more positive convex to that. 175 00:10:00,360 --> 00:10:02,520 Speaker 1: I said a lot of confusing things. They're the curve sleepeners. 176 00:10:02,520 --> 00:10:06,640 Speaker 1: Where you say I like short maturities over loger maturities 177 00:10:06,679 --> 00:10:10,480 Speaker 1: because those yields could fall faster than loger maturities, or 178 00:10:10,520 --> 00:10:13,200 Speaker 1: perhaps arise more slowly. Now, that's an odd thing to 179 00:10:13,240 --> 00:10:15,719 Speaker 1: say that the short end of the yield curve will 180 00:10:15,720 --> 00:10:18,439 Speaker 1: perform better than the long end when the Feds raising 181 00:10:18,600 --> 00:10:22,040 Speaker 1: short term interest rates, But the convexity is good. What 182 00:10:22,080 --> 00:10:24,280 Speaker 1: I mean is, if things go wrong in the world 183 00:10:24,320 --> 00:10:29,040 Speaker 1: in or are they're expected to go wrong in, where 184 00:10:29,120 --> 00:10:31,080 Speaker 1: is it that you'd want to be in the on 185 00:10:31,120 --> 00:10:36,080 Speaker 1: the yield curve in terms of outperforming them all? That's 186 00:10:36,160 --> 00:10:39,160 Speaker 1: what we would say. Or in short dated credit instruments. 187 00:10:39,160 --> 00:10:41,800 Speaker 1: There are some attractive instruments because of these selling but 188 00:10:42,120 --> 00:10:45,920 Speaker 1: foreign investors due to the rising hedge and cars. I 189 00:10:45,960 --> 00:10:49,560 Speaker 1: want to know what you guys are doing with leveraged 190 00:10:49,679 --> 00:10:54,600 Speaker 1: loans everybody, even on John Pharaoh's incredibly successful property the 191 00:10:54,679 --> 00:10:56,720 Speaker 1: real yield I mean, you're going to change it to 192 00:10:56,760 --> 00:11:01,839 Speaker 1: the real leverage long ram on on Fridays seen, Well, 193 00:11:01,880 --> 00:11:05,959 Speaker 1: we're picking apart of the loan documents to ensure that 194 00:11:06,000 --> 00:11:09,040 Speaker 1: we're protected, because what you're seeing in these leverage loans, 195 00:11:09,080 --> 00:11:14,040 Speaker 1: of course, is a reduction in protection for investors. In fact, 196 00:11:14,160 --> 00:11:16,880 Speaker 1: it's it's felt that about eight percent sort of report 197 00:11:16,920 --> 00:11:19,360 Speaker 1: on the I m F website on this that that 198 00:11:19,520 --> 00:11:21,960 Speaker 1: about eighty percent of new issues these days are so 199 00:11:22,040 --> 00:11:26,520 Speaker 1: called covenant light versus about a number of years ago. 200 00:11:26,640 --> 00:11:30,280 Speaker 1: And and this is bringing down well covenants, meaning what 201 00:11:30,440 --> 00:11:32,640 Speaker 1: is it there in a document, the legal document that 202 00:11:32,679 --> 00:11:35,079 Speaker 1: protects the investor. There are fewer of these, and this 203 00:11:35,160 --> 00:11:39,320 Speaker 1: is reducing recovery values on companies that don't pay back 204 00:11:39,360 --> 00:11:42,520 Speaker 1: the loans. And typically there are eight percent for loans 205 00:11:42,520 --> 00:11:45,400 Speaker 1: and now it's falling to about seventy. Uh. This is 206 00:11:45,440 --> 00:11:47,880 Speaker 1: an untracted one has to be very careful. So the 207 00:11:47,920 --> 00:11:49,880 Speaker 1: big question for a lot of people then Okay, I'm 208 00:11:49,920 --> 00:11:52,160 Speaker 1: listening to this. I want to be up in the 209 00:11:52,200 --> 00:11:53,920 Speaker 1: capital structure. But the problem is for a lot of 210 00:11:53,960 --> 00:11:57,480 Speaker 1: leverage loans is that actually there are some loan only 211 00:11:57,520 --> 00:11:59,280 Speaker 1: companies out there. So you think you're going up in 212 00:11:59,280 --> 00:12:01,160 Speaker 1: a capital struct you think you've seen the secuity, but 213 00:12:01,160 --> 00:12:03,679 Speaker 1: there's nothing beneath you, so you'll really correct so that 214 00:12:03,840 --> 00:12:06,440 Speaker 1: we would be extraordinarily cautious in that area. One area 215 00:12:06,520 --> 00:12:08,760 Speaker 1: to go down in the capital structure, though, is so 216 00:12:08,880 --> 00:12:12,840 Speaker 1: called bank capital securities. Those in Europe, bank capital securities 217 00:12:12,880 --> 00:12:15,199 Speaker 1: are a sliver above equities in the capital structure. In 218 00:12:15,240 --> 00:12:17,520 Speaker 1: other ways, if something goes wrong at one of these banks, 219 00:12:17,520 --> 00:12:19,800 Speaker 1: the the equity holder gets hit first and then the 220 00:12:19,840 --> 00:12:22,600 Speaker 1: bank capital hold it gets its second. So why would 221 00:12:22,600 --> 00:12:26,520 Speaker 1: that be an attractive idea. Well, you only get hurt 222 00:12:26,679 --> 00:12:29,520 Speaker 1: if the capital ratios of these banks, the amount of 223 00:12:29,520 --> 00:12:33,079 Speaker 1: money that's invested in these banks um falls below a 224 00:12:33,080 --> 00:12:35,760 Speaker 1: certain trigger point. And if you've done the work, and 225 00:12:36,440 --> 00:12:38,560 Speaker 1: you need teams of people to do this, you can 226 00:12:38,640 --> 00:12:40,760 Speaker 1: shock the balance sheet of a bank to see whether 227 00:12:40,840 --> 00:12:45,000 Speaker 1: or not in certain adverse scenarios that's capital levels will fall. 228 00:12:45,000 --> 00:12:47,400 Speaker 1: And we think that yields in the seven eight percent 229 00:12:47,520 --> 00:12:52,120 Speaker 1: range adequately compensate investors for investments in bank capital. So 230 00:12:52,160 --> 00:12:55,080 Speaker 1: these are the contingent convertible bonds correct cops as one 231 00:12:55,080 --> 00:12:58,439 Speaker 1: could say, a T one additional tier one capital bonds. 232 00:12:58,440 --> 00:13:02,000 Speaker 1: Regulators put those to these bombs, and we just getting 233 00:13:02,040 --> 00:13:04,400 Speaker 1: stuck into it. That's so, do you know what the 234 00:13:04,400 --> 00:13:06,920 Speaker 1: most read stories on the blindberg? Because we try and 235 00:13:06,920 --> 00:13:09,360 Speaker 1: get Tony in a bit of trouble that Pimco said 236 00:13:09,360 --> 00:13:12,160 Speaker 1: to be the sole buyer of any credits three billion 237 00:13:12,200 --> 00:13:15,000 Speaker 1: dollar bonds. Let me guess you can't comment. I'm sure 238 00:13:15,040 --> 00:13:17,520 Speaker 1: you can say, can just talk to us about it 239 00:13:17,559 --> 00:13:19,640 Speaker 1: a little bit. What's what's the story that we can 240 00:13:19,679 --> 00:13:21,600 Speaker 1: say I'm going to be a good politician here. Of 241 00:13:21,600 --> 00:13:23,400 Speaker 1: course you can talk about it. We can say that 242 00:13:24,160 --> 00:13:27,880 Speaker 1: any investment like that would indicate that an investor did 243 00:13:27,880 --> 00:13:30,360 Speaker 1: their homework from the bottom up, and this is a 244 00:13:30,400 --> 00:13:32,920 Speaker 1: climate for investing from the bottom up. If this were 245 00:13:32,960 --> 00:13:38,600 Speaker 1: two thousand, let's not about individual transividual transactions, including we 246 00:13:38,640 --> 00:13:41,600 Speaker 1: would say, be cautious on hi yield. But but but 247 00:13:41,800 --> 00:13:44,840 Speaker 1: we'd say certain high yield securities are attractive short dated 248 00:13:44,880 --> 00:13:47,319 Speaker 1: how yield maturities that we would say are but not 249 00:13:47,480 --> 00:13:52,520 Speaker 1: break Okay, Tony Cosenzi, the guy from pimcoes waving would 250 00:13:52,520 --> 00:13:55,680 Speaker 1: be quiet as well, Anthony Casanzio with Pimco, and of 251 00:13:55,720 --> 00:13:58,880 Speaker 1: course the expert in the short term space as well, 252 00:13:58,920 --> 00:14:02,319 Speaker 1: Bloomberg Surveillance is morning wrotch You by sector spider e 253 00:14:02,520 --> 00:14:05,360 Speaker 1: T S. Why buy a single stock when you can 254 00:14:05,400 --> 00:14:09,840 Speaker 1: invest in the entire sector? Visit sector spdrs dot com. 255 00:14:09,880 --> 00:14:13,559 Speaker 1: Call them at one at six six sector e t 256 00:14:13,760 --> 00:14:15,920 Speaker 1: F Jen Green in the screen futures up, tended down, 257 00:14:15,960 --> 00:14:19,880 Speaker 1: futures up and twelve. What question would US chairman Paul today, Oh, 258 00:14:19,920 --> 00:14:22,360 Speaker 1: if you don't know when neutral is, how do you 259 00:14:22,400 --> 00:14:25,120 Speaker 1: know that you're a long way away from it, which 260 00:14:25,160 --> 00:14:27,720 Speaker 1: was his comment back in early October. And I think 261 00:14:27,720 --> 00:14:29,800 Speaker 1: he's got to be nailed and pinned down on that 262 00:14:30,000 --> 00:14:32,440 Speaker 1: to really find out whether that was a communication error, 263 00:14:32,440 --> 00:14:34,920 Speaker 1: a mistake, or something. He's just changed his mind on 264 00:14:34,960 --> 00:14:37,440 Speaker 1: his six But when do you get rid of the dots? 265 00:14:37,640 --> 00:14:41,200 Speaker 1: They've been tony quickly and they've been successful. That's been 266 00:14:41,280 --> 00:14:43,920 Speaker 1: successful in the sense that they provide some degree of 267 00:14:44,000 --> 00:14:47,320 Speaker 1: forward guidance. Yes, because communication is so important too. Would 268 00:14:47,320 --> 00:14:51,160 Speaker 1: you get rid of the dots? No? They could be changed, 269 00:14:51,240 --> 00:14:54,000 Speaker 1: perhaps to give us a little more clarity. And I 270 00:14:54,120 --> 00:14:57,320 Speaker 1: do think some degree a degree of forward guidance is 271 00:14:57,440 --> 00:14:59,920 Speaker 1: useful to the markets, and it does keep untility lower. 272 00:15:00,200 --> 00:15:04,000 Speaker 1: PIMCO is still saying go away and don't mention you. Okay, 273 00:15:04,040 --> 00:15:06,120 Speaker 1: that was good, that was really squeezed you. That's a 274 00:15:06,160 --> 00:15:07,880 Speaker 1: kind of question you ask in the real yield. We 275 00:15:07,920 --> 00:15:12,800 Speaker 1: wouldn't ask a rude question like that on on Bloomberg. 276 00:15:22,520 --> 00:15:26,680 Speaker 1: We haven't a steamed guest, I say with us here 277 00:15:26,720 --> 00:15:28,440 Speaker 1: in our world. See, I thought you were gonna say, 278 00:15:28,440 --> 00:15:31,120 Speaker 1: a television celebrity, you know he's got this is the 279 00:15:31,200 --> 00:15:35,640 Speaker 1: second act of earned celebrity. Yes, David rubin Stein and 280 00:15:35,800 --> 00:15:38,640 Speaker 1: his show of Courses peer to peer conversations. The show 281 00:15:38,680 --> 00:15:42,400 Speaker 1: airs Wednesday, that would be today, nine pm on Bloomberg 282 00:15:42,440 --> 00:15:46,000 Speaker 1: Television and also can be heard on Thursdays at five 283 00:15:46,120 --> 00:15:49,920 Speaker 1: pm on Bloomberg Radio, and it also airs on Bloomberg 284 00:15:49,920 --> 00:15:52,560 Speaker 1: Television during the weekend. David Rubinstein, thank you very much 285 00:15:52,600 --> 00:15:57,440 Speaker 1: for being here. Tell us about I guess he's retired. Uh, 286 00:15:58,040 --> 00:16:01,480 Speaker 1: Justice Kennedy and your conversation. I gotta just go right. 287 00:16:01,560 --> 00:16:04,840 Speaker 1: Did he tell you why he decided to leave the 288 00:16:04,920 --> 00:16:08,720 Speaker 1: court now? Well, he asked him, and um, he gave 289 00:16:08,800 --> 00:16:11,280 Speaker 1: a number of reasons, but I would say basically, he 290 00:16:11,360 --> 00:16:13,440 Speaker 1: felt that it was time to go. He had been 291 00:16:13,440 --> 00:16:16,280 Speaker 1: on the court for thirty years, He'd done a lot 292 00:16:16,320 --> 00:16:18,320 Speaker 1: of great things there, in his view, and he wanted 293 00:16:18,360 --> 00:16:20,480 Speaker 1: to spend more time with his family. He has number 294 00:16:20,480 --> 00:16:23,920 Speaker 1: of children, grandchildren, and you know, he's eighty two years old, 295 00:16:23,960 --> 00:16:25,520 Speaker 1: and at some point you want to spend more time 296 00:16:25,560 --> 00:16:27,000 Speaker 1: with your family. And I think he felt he had 297 00:16:27,000 --> 00:16:30,400 Speaker 1: accomplished what he wanted to accomplish. So, UM, I certainly 298 00:16:30,400 --> 00:16:34,240 Speaker 1: wouldn't fault him for retiring at that age. See, Tom, 299 00:16:34,360 --> 00:16:36,880 Speaker 1: you have a long and illustrious career ahead of you. 300 00:16:37,440 --> 00:16:40,800 Speaker 1: He is such an important justice. I was down in 301 00:16:40,960 --> 00:16:45,720 Speaker 1: Richmond at the John Marshall Fun Uh yeah, black tie dinner, 302 00:16:45,880 --> 00:16:48,280 Speaker 1: and he did something that you rarely see it a 303 00:16:48,320 --> 00:16:52,560 Speaker 1: black ty dinner. He stopped the room and he stomped 304 00:16:52,560 --> 00:16:56,560 Speaker 1: it with his intelligence. I've always taken it is a 305 00:16:56,560 --> 00:17:00,240 Speaker 1: is a slight of Justice Kennedy because he's rays are 306 00:17:00,400 --> 00:17:04,320 Speaker 1: sharp smart. Given people think he's in the middle and 307 00:17:04,359 --> 00:17:06,320 Speaker 1: he's wished she washed. He's not wish he washed. He 308 00:17:06,359 --> 00:17:08,560 Speaker 1: in any way, shape or form is he He's a 309 00:17:08,640 --> 00:17:12,679 Speaker 1: strong believer in certain constitutional principles. He was a legal scholar. Remember, 310 00:17:12,760 --> 00:17:15,440 Speaker 1: after he was graduated Harvard Law School, he went back 311 00:17:15,480 --> 00:17:18,520 Speaker 1: to Sacramento took over his father's practice, but he taught 312 00:17:18,600 --> 00:17:21,240 Speaker 1: law school at night for many many years, and even 313 00:17:21,280 --> 00:17:23,040 Speaker 1: as a judge when he became a judge at a 314 00:17:23,160 --> 00:17:25,440 Speaker 1: very young age in his late thirties, he's still taught 315 00:17:25,520 --> 00:17:29,159 Speaker 1: law school and largely constitutional law. So he really understands 316 00:17:29,160 --> 00:17:31,000 Speaker 1: the law, and to him, it's it's it's a very 317 00:17:31,040 --> 00:17:34,840 Speaker 1: important principle to follow the Constitution. Um. I wouldn't say 318 00:17:34,880 --> 00:17:38,480 Speaker 1: he's an originalist, uh like Justice Scalia, but I would 319 00:17:38,520 --> 00:17:41,400 Speaker 1: say he's somebody who really believes in the Constitution and 320 00:17:41,720 --> 00:17:46,080 Speaker 1: his opinions. Uh, we're really vital to the five to 321 00:17:46,119 --> 00:17:49,720 Speaker 1: four decisions in certain important cases. For example, gay marriage. 322 00:17:49,960 --> 00:17:53,280 Speaker 1: He wrote the five to four decision, and really that 323 00:17:53,400 --> 00:17:55,960 Speaker 1: was something that changed the course of our own history 324 00:17:56,000 --> 00:17:59,080 Speaker 1: because it legalized gay marriage and really made it possible 325 00:17:59,119 --> 00:18:01,720 Speaker 1: for many people to get married who couldn't otherwise get married. Uh. 326 00:18:01,800 --> 00:18:04,159 Speaker 1: The same thing is true in another case, which is 327 00:18:04,320 --> 00:18:08,240 Speaker 1: uh uh Citizens United. There's a case that some people 328 00:18:08,240 --> 00:18:11,199 Speaker 1: who liked his decision on gay marriage did not like 329 00:18:11,320 --> 00:18:14,879 Speaker 1: that decision. But he feels strongly that Uh, corporations have 330 00:18:14,960 --> 00:18:17,199 Speaker 1: the right to speech speech, just as humans do, and 331 00:18:17,240 --> 00:18:19,560 Speaker 1: he felt that you shouldn't take away their right to 332 00:18:19,600 --> 00:18:23,120 Speaker 1: make political contributions. What was the surprise of the interview? 333 00:18:23,160 --> 00:18:25,680 Speaker 1: An open question is always a surprise, whether it's Jeff 334 00:18:25,720 --> 00:18:28,560 Speaker 1: Bezos or Madame mcguard. But what was the surprise with 335 00:18:28,680 --> 00:18:32,879 Speaker 1: Justice Kennedy? Well, I think the surprise is his humility. 336 00:18:33,480 --> 00:18:35,399 Speaker 1: If you had been on the court for thirty years, 337 00:18:36,119 --> 00:18:38,159 Speaker 1: uh and wrote some of the most important decisions in 338 00:18:38,200 --> 00:18:41,400 Speaker 1: the last thirty, forty or fifty years, you might expect 339 00:18:41,520 --> 00:18:44,520 Speaker 1: some more I want to say, arrogance, but somebody who 340 00:18:44,560 --> 00:18:47,520 Speaker 1: was a little more full of himself. He's very modest. Um. 341 00:18:47,600 --> 00:18:51,600 Speaker 1: He doesn't feel that, uh that he's as famous or 342 00:18:51,600 --> 00:18:53,960 Speaker 1: deserves to be as famous as he's become. Um. He 343 00:18:54,000 --> 00:18:56,600 Speaker 1: really sees himself as a as a judge who was 344 00:18:56,640 --> 00:19:00,159 Speaker 1: crafting very good legal opinions. But I wouldn't say he 345 00:19:00,240 --> 00:19:04,800 Speaker 1: had any kind of overweening ego. Did he speak about 346 00:19:04,840 --> 00:19:09,440 Speaker 1: the partisanship that exists in the country and in relation 347 00:19:09,640 --> 00:19:13,320 Speaker 1: to collegiality, let's say, on the court. He did say 348 00:19:13,320 --> 00:19:15,480 Speaker 1: that the collegiality on the court is one of its 349 00:19:15,480 --> 00:19:19,240 Speaker 1: strongest UHM attributes. You have people in the court who 350 00:19:19,320 --> 00:19:23,040 Speaker 1: disagree with each other quite violently in terms of their opinions. 351 00:19:23,119 --> 00:19:27,840 Speaker 1: For a long time, Scalia and Ginsburg had terrible disagreements 352 00:19:27,880 --> 00:19:30,040 Speaker 1: in terms of the opinions, but they socialized with each other. 353 00:19:30,080 --> 00:19:31,959 Speaker 1: They both loved oper and so forth, and they were 354 00:19:32,040 --> 00:19:34,879 Speaker 1: very good friends. The same is true with uh Justice 355 00:19:34,920 --> 00:19:37,719 Speaker 1: Kagan and Justice Scalia. They hunted together even though they 356 00:19:37,840 --> 00:19:41,080 Speaker 1: had disagreements on on ideological matters. So he thinks the 357 00:19:41,080 --> 00:19:43,560 Speaker 1: collegiality is very important, and I think that was one 358 00:19:43,560 --> 00:19:45,320 Speaker 1: of the most important things. He pointed out that even 359 00:19:45,359 --> 00:19:48,080 Speaker 1: though they have different disagreements on on issues that the 360 00:19:48,119 --> 00:19:49,879 Speaker 1: court does get along quite well, and he said that 361 00:19:49,920 --> 00:19:52,720 Speaker 1: the new justice UM would fit in quite well in 362 00:19:52,760 --> 00:19:56,480 Speaker 1: that area. Did he speak of any of the specific 363 00:19:56,640 --> 00:20:01,000 Speaker 1: issues that the Court is going to face. No, UM. 364 00:20:01,040 --> 00:20:03,760 Speaker 1: Justices do not like to talk about the things that 365 00:20:03,760 --> 00:20:06,000 Speaker 1: are to be decided in the future, and so therefore 366 00:20:06,040 --> 00:20:08,280 Speaker 1: he did not addressing is. I didn't really think he would. 367 00:20:08,320 --> 00:20:10,560 Speaker 1: I didn't really ask him about those issues. Um. He 368 00:20:10,640 --> 00:20:12,880 Speaker 1: did think that the two of his former clerks would 369 00:20:12,920 --> 00:20:15,400 Speaker 1: be very good justices, And he's the only justice who 370 00:20:15,400 --> 00:20:18,439 Speaker 1: had two former clerks become justices in the court, and 371 00:20:18,560 --> 00:20:21,200 Speaker 1: actually in one of them, he was on the court 372 00:20:21,200 --> 00:20:22,920 Speaker 1: when one of his former clerks was with him and 373 00:20:22,960 --> 00:20:25,400 Speaker 1: I asked him, well, did you tell your former clerk 374 00:20:25,440 --> 00:20:27,199 Speaker 1: that he should vote with you and everything? And he said, well, 375 00:20:27,240 --> 00:20:29,720 Speaker 1: it doesn't work that quite that way. Um. Interestingly, he 376 00:20:29,760 --> 00:20:32,000 Speaker 1: pointed out that they really don't lobby each other. I 377 00:20:32,040 --> 00:20:33,680 Speaker 1: would have thought they'd go down the hall and say, 378 00:20:34,000 --> 00:20:36,280 Speaker 1: have you vote for me, I'll vote for you, they said. 379 00:20:36,280 --> 00:20:38,240 Speaker 1: He said, that's against the law. You can't be trading 380 00:20:38,440 --> 00:20:41,880 Speaker 1: things like that. So they obviously trade opinions back and forth. 381 00:20:41,920 --> 00:20:43,920 Speaker 1: But they don't really lobby each other, he said, Well 382 00:20:44,000 --> 00:20:46,520 Speaker 1: informative to say the least. David Rubens, dying peer to 383 00:20:46,600 --> 00:21:02,080 Speaker 1: peer conversations, can't say enough about it. This is the 384 00:21:02,119 --> 00:21:04,440 Speaker 1: interview of the day for those of you who interested 385 00:21:05,119 --> 00:21:09,040 Speaker 1: in the exceptionally important holiday shopping season, the ups and 386 00:21:09,119 --> 00:21:12,960 Speaker 1: downs of retail in America, and far more, the dynamics 387 00:21:13,000 --> 00:21:17,560 Speaker 1: of our ever changing luxury movement. Lucas Solos Assoka rather 388 00:21:18,119 --> 00:21:20,920 Speaker 1: is an institution in x M b MP. Perry Bond 389 00:21:21,000 --> 00:21:24,600 Speaker 1: joins us from Geneva, Switzerland. Look, we are honored to 390 00:21:24,640 --> 00:21:27,600 Speaker 1: have you on the program. And I guess everything starts 391 00:21:27,600 --> 00:21:32,480 Speaker 1: and ends with what Gucci wrought Gucci. It changed luxury. 392 00:21:32,640 --> 00:21:37,199 Speaker 1: What did Gucci do to the rest of retail. Well, 393 00:21:37,240 --> 00:21:40,240 Speaker 1: I think that they brought newness in a in a 394 00:21:40,359 --> 00:21:44,680 Speaker 1: in a in a big way, and they also integrated 395 00:21:45,160 --> 00:21:50,240 Speaker 1: luxury with the codes of streets wear. But esthetics resonates 396 00:21:50,280 --> 00:21:55,000 Speaker 1: massively with younger consumers, especially younger consumers in China, and 397 00:21:55,080 --> 00:21:59,320 Speaker 1: they've been sowering on this on the sail wind within 398 00:21:59,400 --> 00:22:01,480 Speaker 1: that is the two for the announcement today that was 399 00:22:01,520 --> 00:22:03,800 Speaker 1: a little light on China. The stock I believe was 400 00:22:03,840 --> 00:22:08,080 Speaker 1: down at one A lot of people listening would say, Okay, 401 00:22:08,200 --> 00:22:11,480 Speaker 1: luxury matters, but at the margin, is it really all 402 00:22:11,560 --> 00:22:15,840 Speaker 1: about China? Is that true? Well, to some extent it 403 00:22:16,000 --> 00:22:20,000 Speaker 1: is because today the Chinese represent globally about a third 404 00:22:20,080 --> 00:22:23,520 Speaker 1: of the market, but they account for a good two 405 00:22:23,600 --> 00:22:28,240 Speaker 1: thirds the growth. Now, what we've seen in China in 406 00:22:28,280 --> 00:22:32,119 Speaker 1: the most recent months is that Chinese consumer adopt confidence 407 00:22:32,280 --> 00:22:35,760 Speaker 1: was coming off the peak. There was a significant increase 408 00:22:35,800 --> 00:22:39,080 Speaker 1: in Chinese consumer confidence between mid sixteen and the end 409 00:22:39,119 --> 00:22:44,719 Speaker 1: of seventeen, which correlated with strong luxury market grows globally. 410 00:22:45,680 --> 00:22:51,280 Speaker 1: And we expect that this macroeconomic moderation that was going 411 00:22:51,359 --> 00:22:54,720 Speaker 1: on on its own in China could potentially be made 412 00:22:54,800 --> 00:22:59,400 Speaker 1: worse by the international trade confrontation with the US unless 413 00:22:59,440 --> 00:23:03,160 Speaker 1: we have major positive surprises from the G twenty meeting 414 00:23:03,240 --> 00:23:09,280 Speaker 1: if we can, which we don't necessarily bank upon. Luka, 415 00:23:09,320 --> 00:23:12,320 Speaker 1: I just want to ask using a variety of companies, 416 00:23:12,359 --> 00:23:14,119 Speaker 1: and then you can kind of parse out what you 417 00:23:14,160 --> 00:23:20,439 Speaker 1: think is the most important. Tiffany, lvmh, Richemont, Caring and 418 00:23:20,600 --> 00:23:24,920 Speaker 1: Product and Burbery, all luxury goods, all on Tom's Christmas list? 419 00:23:25,520 --> 00:23:28,120 Speaker 1: Which are the stocks that should be on the list? 420 00:23:28,280 --> 00:23:33,520 Speaker 1: Of investors. Well, I think that they're probably at a 421 00:23:33,680 --> 00:23:37,680 Speaker 1: very different stage. On Prala for example that you mentioned, 422 00:23:38,560 --> 00:23:44,960 Speaker 1: we see that after a number of years when management 423 00:23:45,080 --> 00:23:48,639 Speaker 1: was missing a beat on innovation, on price positioning, on 424 00:23:48,760 --> 00:23:51,399 Speaker 1: embracing digital was a way to build a brand and 425 00:23:51,440 --> 00:23:56,000 Speaker 1: distribute the product. The being h taking a lot of 426 00:23:56,040 --> 00:24:00,040 Speaker 1: those boxes. So they could potentially buck the trend and 427 00:24:00,080 --> 00:24:04,200 Speaker 1: they could continue to produce good organic growth. But given 428 00:24:04,280 --> 00:24:09,440 Speaker 1: the limited free float in the shares, could potentially lift 429 00:24:09,480 --> 00:24:12,240 Speaker 1: them from the lower end of the trading range they've 430 00:24:12,240 --> 00:24:15,200 Speaker 1: seen in the most recent months. So in my view 431 00:24:15,280 --> 00:24:21,440 Speaker 1: this could be you know, an interesting short term long position. Well, 432 00:24:21,480 --> 00:24:25,320 Speaker 1: I think the likes of well they made would cash 433 00:24:25,359 --> 00:24:28,760 Speaker 1: my favorite as the long term exposure to the sector. Now, 434 00:24:28,800 --> 00:24:32,720 Speaker 1: having said that, if the Chinese were continuing to be 435 00:24:32,800 --> 00:24:36,679 Speaker 1: on the back foot in two thousand nineteen, then even 436 00:24:36,680 --> 00:24:41,399 Speaker 1: el their made with potentially in absolute terms moderate with 437 00:24:41,520 --> 00:24:44,520 Speaker 1: the sector. So one would have to look at the 438 00:24:44,560 --> 00:24:49,960 Speaker 1: long term for this one instead. Look do does beauty 439 00:24:50,160 --> 00:24:57,000 Speaker 1: count as a luxury retail item this year? Well, if 440 00:24:57,080 --> 00:24:59,880 Speaker 1: the enterprise point of luxury goods in a way, it's 441 00:25:00,000 --> 00:25:02,880 Speaker 1: actually when we look at couture or ready to wear 442 00:25:02,960 --> 00:25:06,119 Speaker 1: brands like Chanel, they have a huge business in this 443 00:25:06,359 --> 00:25:10,840 Speaker 1: category door as well. So it's uh, it's the most 444 00:25:10,880 --> 00:25:16,320 Speaker 1: democratic and the most accessible portion of the luxe broader 445 00:25:16,400 --> 00:25:22,280 Speaker 1: luxury space. It is distributed though accordingly to FMCG logic. 446 00:25:22,560 --> 00:25:24,600 Speaker 1: So I think that it's a it's a bit of 447 00:25:24,600 --> 00:25:28,479 Speaker 1: a hybrid look. As one of our themes today has 448 00:25:28,520 --> 00:25:32,440 Speaker 1: been created destruction. We've been looking at the media business earlier, UH, 449 00:25:32,640 --> 00:25:37,960 Speaker 1: continesscing the economists restructuring as well. These European conglomerates and 450 00:25:38,000 --> 00:25:39,520 Speaker 1: I know one of them got rid of d K 451 00:25:39,840 --> 00:25:43,280 Speaker 1: n Y, a name that our American listeners would know. 452 00:25:43,400 --> 00:25:46,040 Speaker 1: But do they need to do a calling out of brands? 453 00:25:46,040 --> 00:25:48,919 Speaker 1: I mean, are they opportunistic next year in the just 454 00:25:49,400 --> 00:25:55,440 Speaker 1: streamlining their conglomerates nous or is that not a theme now? 455 00:25:55,520 --> 00:25:59,199 Speaker 1: I I think that for sure. On the one side, 456 00:25:59,520 --> 00:26:02,840 Speaker 1: as far as media investment and communication, with seeing a 457 00:26:02,920 --> 00:26:08,760 Speaker 1: huge shift to digital ko L and UH and CRM, 458 00:26:08,800 --> 00:26:10,840 Speaker 1: I think that this is going to be a trend 459 00:26:11,920 --> 00:26:14,680 Speaker 1: for the next three to five years and it's not 460 00:26:14,800 --> 00:26:18,919 Speaker 1: going to relent. So my sense is that any service 461 00:26:18,960 --> 00:26:22,399 Speaker 1: providers in this space and any publishers would have to 462 00:26:22,480 --> 00:26:26,240 Speaker 1: take note when it comes to the industry itself, I 463 00:26:26,280 --> 00:26:29,240 Speaker 1: would expect that in a slowdown and if the sector 464 00:26:29,320 --> 00:26:34,320 Speaker 1: got worse uh then we would see more consolidation. This 465 00:26:34,440 --> 00:26:39,919 Speaker 1: industry is a quite fragmented and with multiplying competitive fronts, 466 00:26:40,680 --> 00:26:45,199 Speaker 1: smaller and medium sized companies a very tough time standing 467 00:26:45,240 --> 00:26:48,600 Speaker 1: on their own. Look at just before we let you 468 00:26:48,680 --> 00:26:51,640 Speaker 1: go out, it's a little chilly in in New York 469 00:26:51,680 --> 00:26:54,840 Speaker 1: and in many places around the world. Do you consider 470 00:26:55,000 --> 00:26:59,440 Speaker 1: Canada Goose and Montclair are those luxury brands that people 471 00:26:59,440 --> 00:27:01,560 Speaker 1: are going to can tinue to buy and should people 472 00:27:01,560 --> 00:27:06,719 Speaker 1: buy those starts too well? That they're clearly sitting at 473 00:27:06,720 --> 00:27:11,560 Speaker 1: a sweet spot. I think that, you know, expensive casual 474 00:27:12,880 --> 00:27:17,080 Speaker 1: apparel is the space which had very few players up 475 00:27:17,160 --> 00:27:22,040 Speaker 1: until very recently, and Montclair and Canada Goose to uh 476 00:27:22,080 --> 00:27:25,719 Speaker 1: to to to to some extent, tick the box in 477 00:27:25,760 --> 00:27:29,840 Speaker 1: that in that space. I think that the most important 478 00:27:29,960 --> 00:27:35,760 Speaker 1: challenge to sustain growth long term is going to continue 479 00:27:35,920 --> 00:27:43,520 Speaker 1: to nourish a pipeline of product innovation, communication innovation, and 480 00:27:43,680 --> 00:27:47,320 Speaker 1: in store surprises. On this runt, I'm impressed by what 481 00:27:47,440 --> 00:27:50,560 Speaker 1: Montclair has been doing. I think that Canada Goose is 482 00:27:50,600 --> 00:27:55,280 Speaker 1: starting from a much smaller base and therefore they have 483 00:27:55,680 --> 00:27:59,560 Speaker 1: a lot of the levers that Montclair had available a 484 00:27:59,600 --> 00:28:02,480 Speaker 1: few years to go right now, like retail network expansion. 485 00:28:02,920 --> 00:28:05,320 Speaker 1: But I would like to see them more innovative on 486 00:28:05,800 --> 00:28:08,720 Speaker 1: the product innovation from so to make sure that they 487 00:28:08,760 --> 00:28:13,200 Speaker 1: can sustain and not be pigeonholed as a functional brand. Look, 488 00:28:13,359 --> 00:28:15,359 Speaker 1: so thank you so much for being with us. The 489 00:28:15,480 --> 00:28:19,120 Speaker 1: next saying VMP Perry Well from Geneva, Switzerland. We're doing this, folks. 490 00:28:19,119 --> 00:28:21,680 Speaker 1: We're having a lot of fun with it across all 491 00:28:21,720 --> 00:28:25,000 Speaker 1: of retail, across all price points, from the big boxes 492 00:28:25,080 --> 00:28:28,359 Speaker 1: and the discounters up here to luxury and just Lucas 493 00:28:28,400 --> 00:28:31,000 Speaker 1: one like eighteen awards, like you know, he's he's one 494 00:28:31,760 --> 00:28:34,600 Speaker 1: like four years in a row, institutional investor that kind 495 00:28:34,600 --> 00:28:36,480 Speaker 1: of thing. If you win that award, do you get 496 00:28:36,480 --> 00:28:42,440 Speaker 1: the Gucci Flash Trek sneaker with removable crystals. Removable crystals 497 00:28:42,440 --> 00:28:58,480 Speaker 1: are very very, very very important. Nicholas joins us right now, 498 00:28:58,520 --> 00:29:00,440 Speaker 1: and there's always like eight things to talk talk about. 499 00:29:00,600 --> 00:29:03,320 Speaker 1: Maybe we'll get back to GM and autos and data 500 00:29:03,360 --> 00:29:07,680 Speaker 1: Trek Data. I I didn't take Fox when I want 501 00:29:07,680 --> 00:29:10,560 Speaker 1: to how to properly introduce a guests, But Nick coole 502 00:29:10,680 --> 00:29:12,880 Speaker 1: is what I would say is bitcoin is front and 503 00:29:12,920 --> 00:29:16,120 Speaker 1: center for you. Is it a real market? You know, 504 00:29:16,280 --> 00:29:18,120 Speaker 1: it's hard to tell if it's a real market. It 505 00:29:18,200 --> 00:29:20,640 Speaker 1: is certainly a very cloudy market. There are certainly some 506 00:29:20,680 --> 00:29:23,320 Speaker 1: bad actors in there and haven't for a while, so 507 00:29:23,360 --> 00:29:25,640 Speaker 1: we don't really know. But at least we know that 508 00:29:25,680 --> 00:29:28,440 Speaker 1: it's getting better, the regulations are improving. Maybe in a 509 00:29:28,480 --> 00:29:31,520 Speaker 1: year or two it will be a real real markets. 510 00:29:31,520 --> 00:29:35,240 Speaker 1: What characterizes a real real market other than having buyers 511 00:29:35,240 --> 00:29:39,280 Speaker 1: and sellers, which seem to exist for bitcoin and other cryptocurrency. 512 00:29:39,360 --> 00:29:40,720 Speaker 1: You know, it's it's the right point. I mean, what 513 00:29:40,800 --> 00:29:42,600 Speaker 1: comes down to is exactly what we have in US 514 00:29:42,640 --> 00:29:45,040 Speaker 1: stocks and to a lesser degree in US bonds. We 515 00:29:45,120 --> 00:29:48,880 Speaker 1: have transparency, we have reportability, we have accountability, We have 516 00:29:49,000 --> 00:29:52,240 Speaker 1: regulators that are able to oversee individual transactions and track 517 00:29:52,320 --> 00:29:54,600 Speaker 1: them back to the original source. Those are the kind 518 00:29:54,640 --> 00:29:56,760 Speaker 1: of things that make for a really deep, robust and 519 00:29:56,880 --> 00:30:00,360 Speaker 1: credible market. All right. So if we don't have that 520 00:30:00,680 --> 00:30:06,440 Speaker 1: yet for bitcoin, what's it going to take? It will 521 00:30:06,600 --> 00:30:09,360 Speaker 1: take what's already happened, which is a lot of people 522 00:30:09,480 --> 00:30:13,480 Speaker 1: losing a lot of money and asking for regulation. Regulation 523 00:30:13,560 --> 00:30:16,520 Speaker 1: always comes after the whole force has left the barn. 524 00:30:17,120 --> 00:30:19,320 Speaker 1: Uh and we've had that. So I do see more 525 00:30:19,360 --> 00:30:22,120 Speaker 1: regulation coming into next year because the market has been 526 00:30:22,160 --> 00:30:26,000 Speaker 1: really tough this year. What do you perceive of banks doing? 527 00:30:26,200 --> 00:30:31,880 Speaker 1: Blockchain is a process driven uh I guess methodology or 528 00:30:32,280 --> 00:30:36,840 Speaker 1: a process around the underlying bitcoin? Or is Jamie Diamond 529 00:30:36,960 --> 00:30:40,160 Speaker 1: right it's a quote unquote fraud. Well as far as 530 00:30:40,200 --> 00:30:42,560 Speaker 1: the blockchain goes, shaping organ actually as a leader in 531 00:30:42,640 --> 00:30:47,640 Speaker 1: that space across border payments and using a proprietary blockchain? 532 00:30:48,440 --> 00:30:51,000 Speaker 1: What is what? What? What does? It? Is? A proprietary 533 00:30:51,120 --> 00:30:55,800 Speaker 1: blockchain enjoyed a decline the bitcoin Bitcoin? We have to 534 00:30:55,840 --> 00:31:00,280 Speaker 1: separate blockchain from these coins and assets used separative Yes, 535 00:31:00,320 --> 00:31:02,600 Speaker 1: and so does JP Diamond because JP Morgan has set 536 00:31:02,680 --> 00:31:06,000 Speaker 1: up a cross border payment blockchain which twenty other banks 537 00:31:06,080 --> 00:31:08,760 Speaker 1: have become involved with and trying to facilitate this very 538 00:31:08,800 --> 00:31:13,160 Speaker 1: grimy business across that's separate from the currency bitcoin. Very 539 00:31:13,200 --> 00:31:18,840 Speaker 1: so so in that case. So in this case, it's 540 00:31:18,920 --> 00:31:22,080 Speaker 1: competition for a system like Swift, which many people are 541 00:31:22,120 --> 00:31:25,640 Speaker 1: familiar with Belgian based, but that's an international payment system. 542 00:31:26,080 --> 00:31:30,160 Speaker 1: Why is this blockchain transfer mechanism better than let's say, 543 00:31:30,200 --> 00:31:33,280 Speaker 1: what we already have Swift because this blockchain allows you 544 00:31:33,360 --> 00:31:37,440 Speaker 1: to have basically contract simulation inside of this system, so 545 00:31:37,600 --> 00:31:40,280 Speaker 1: you don't have to go through and signed contracts and 546 00:31:40,360 --> 00:31:43,200 Speaker 1: revised paperwork. It's really meant to be a better system 547 00:31:43,320 --> 00:31:46,560 Speaker 1: for integrating cross border payments. Swift takes care of the 548 00:31:46,600 --> 00:31:49,000 Speaker 1: payment itself. This system takes care of all the ecosystem 549 00:31:49,000 --> 00:31:51,280 Speaker 1: around it. I want to go to GM. You you 550 00:31:51,360 --> 00:31:55,920 Speaker 1: were legendary on auto analysis a million years ago. The 551 00:31:56,040 --> 00:31:59,440 Speaker 1: GM you knew is very different from this GM. Now 552 00:32:00,040 --> 00:32:03,240 Speaker 1: you live, Chrysler, Daimler, Benz and all that is American 553 00:32:03,320 --> 00:32:09,400 Speaker 1: auto manufacturing done. Certainly American car passenger car manufacturing is done. 554 00:32:09,560 --> 00:32:12,440 Speaker 1: We only have the the quote import brands, the foreign 555 00:32:12,480 --> 00:32:16,680 Speaker 1: brands producing successful sedans. So as far as Ford, GM, 556 00:32:17,280 --> 00:32:20,600 Speaker 1: the old Chrysler, they're just not gonna make sedans anymore. 557 00:32:20,680 --> 00:32:24,560 Speaker 1: I interviewed the gentleman from Flint, Michigan today, Mr Kelty, 558 00:32:24,600 --> 00:32:28,400 Speaker 1: their congressman from the fifth Congressional District. We're reminiscing about 559 00:32:28,480 --> 00:32:31,640 Speaker 1: Buick City and how twenty eight thousand employees came out 560 00:32:31,680 --> 00:32:35,760 Speaker 1: of that thing across Industrial Avenue. That's the nostalgia. What 561 00:32:35,880 --> 00:32:40,240 Speaker 1: does the future American auto business look like besides fancy 562 00:32:40,320 --> 00:32:44,840 Speaker 1: electronic cars for fancy people like pim Fox. As long 563 00:32:44,880 --> 00:32:47,959 Speaker 1: as oil prices stay low, it looks like SUVs, pickup 564 00:32:48,000 --> 00:32:50,280 Speaker 1: trucks and a couple of minivans. It doesn't look like 565 00:32:50,360 --> 00:32:53,040 Speaker 1: passenger cars for the most part. That's the New York term. 566 00:32:53,160 --> 00:32:55,120 Speaker 1: Over the medium term, it looks like a recession because 567 00:32:55,120 --> 00:32:57,640 Speaker 1: you're gonna have a recession, this is the key point, 568 00:32:58,040 --> 00:33:00,480 Speaker 1: and come and bring demand down how many units so 569 00:33:00,560 --> 00:33:02,800 Speaker 1: they're gonna move. I mean, what is Mary Borrow modeling 570 00:33:02,880 --> 00:33:05,600 Speaker 1: for is an industry? I think she is modeling for 571 00:33:05,720 --> 00:33:09,480 Speaker 1: a normalized fifteen million unit run RATEMO down from ely 572 00:33:10,000 --> 00:33:12,440 Speaker 1: and a typical recessionist thirteen. So you've gotta be able 573 00:33:12,480 --> 00:33:14,760 Speaker 1: to live through thirteen. But you also have to be 574 00:33:14,800 --> 00:33:17,600 Speaker 1: able to invest ten to fifteen billion dollars in GM 575 00:33:17,720 --> 00:33:20,320 Speaker 1: cruise to get the autonomous side going. And that's what 576 00:33:20,440 --> 00:33:24,400 Speaker 1: scares the entire industry to death. Should that statement also 577 00:33:24,640 --> 00:33:28,600 Speaker 1: scare anybody that does business with the automobile industry. And 578 00:33:28,720 --> 00:33:32,600 Speaker 1: what I mean by that is advertising across the board. 579 00:33:32,680 --> 00:33:34,680 Speaker 1: It is a problem. It's a global problem because it 580 00:33:34,760 --> 00:33:36,840 Speaker 1: takes the existing problem with the industry, which is global 581 00:33:36,920 --> 00:33:41,280 Speaker 1: overcapacity by a factor of adds disruption to it and 582 00:33:41,440 --> 00:33:43,760 Speaker 1: what comes out the other side, no one knows. You 583 00:33:43,800 --> 00:33:46,000 Speaker 1: don't do like a list of ten things for two thousand, 584 00:33:46,840 --> 00:33:50,520 Speaker 1: do you get to one? Okay, Well, Doug Cast releases 585 00:33:50,640 --> 00:33:54,280 Speaker 1: fifteen smart ideas yesterday. I'm sure Doug Cast will be wrong. 586 00:33:54,360 --> 00:33:57,120 Speaker 1: He's really gracious about being wrong and is some thought 587 00:33:57,240 --> 00:34:01,800 Speaker 1: provoking things are what's your thought provoking idea for next year? 588 00:34:01,880 --> 00:34:04,480 Speaker 1: I mean he had he had Warren Buffet going after 589 00:34:04,600 --> 00:34:08,120 Speaker 1: three m I mean, just this one idea. But instead 590 00:34:08,160 --> 00:34:10,080 Speaker 1: of you know, I was asking your mouth the questions 591 00:34:10,120 --> 00:34:13,719 Speaker 1: give us that thought provoking Nick Kola's idea for next year. 592 00:34:13,880 --> 00:34:16,080 Speaker 1: What I worry about most for next year and for 593 00:34:16,160 --> 00:34:18,200 Speaker 1: the year after is we're going to get a recession 594 00:34:18,640 --> 00:34:22,040 Speaker 1: and all this technology that's gotten built up that improves productivity, 595 00:34:22,440 --> 00:34:24,840 Speaker 1: employers are gonna say, Okay, we're in a recession. We 596 00:34:24,920 --> 00:34:27,719 Speaker 1: need to fire people replace them with technology, whether it 597 00:34:27,800 --> 00:34:32,000 Speaker 1: be hardware, software, AI, and those jobs simply never come back. 598 00:34:32,080 --> 00:34:35,720 Speaker 1: And the next recovery is extremely slow or non existent. 599 00:34:36,280 --> 00:34:42,239 Speaker 1: But that's the theme most of our Listen, this recovery, right, oh, 600 00:34:42,360 --> 00:34:44,680 Speaker 1: this recovery has been a garden variety of recovery just 601 00:34:44,760 --> 00:34:46,759 Speaker 1: took a long time. But we're at record levels of 602 00:34:46,800 --> 00:34:50,279 Speaker 1: lot of unemployments and participation rates have hung in pretty well, 603 00:34:50,760 --> 00:34:53,040 Speaker 1: so I wouldn't say that this has shown any evidence 604 00:34:53,120 --> 00:34:55,160 Speaker 1: of that disruption occurring just yet. And you learned this 605 00:34:55,280 --> 00:34:59,239 Speaker 1: at Chicago and the price theory. That's microeconomics Chicago talk, 606 00:34:59,640 --> 00:35:03,200 Speaker 1: but it's Chicago. You learned that it's about supply and 607 00:35:03,280 --> 00:35:06,400 Speaker 1: demand in every interest. Your theme is there's not going 608 00:35:06,440 --> 00:35:08,960 Speaker 1: to be demanded the margin for labor, right, that's right, 609 00:35:09,080 --> 00:35:11,439 Speaker 1: And I worry that there was next recession. Whenever it comes, 610 00:35:11,480 --> 00:35:13,400 Speaker 1: it's going to be that trigger point when all this 611 00:35:13,520 --> 00:35:16,560 Speaker 1: new technology is ready for prime time and gets adopted 612 00:35:16,560 --> 00:35:19,840 Speaker 1: by corporations. All right, but all of this automation that 613 00:35:19,920 --> 00:35:24,280 Speaker 1: you're talking about, robots don't spend money. So what happens 614 00:35:24,360 --> 00:35:29,239 Speaker 1: to the economy. It's not good. Doesn't sound good, no, 615 00:35:29,360 --> 00:35:31,520 Speaker 1: I mean, that's why, that's why you have all kinds 616 00:35:31,600 --> 00:35:34,880 Speaker 1: of thoughts about the universal basic income and other issues 617 00:35:34,960 --> 00:35:36,800 Speaker 1: that tech is trying to move through this topic, but 618 00:35:36,880 --> 00:35:38,600 Speaker 1: it's very hard. That could be the topic of your 619 00:35:38,680 --> 00:35:42,000 Speaker 1: next book. Robots don't spend money. They don't like not 620 00:35:42,120 --> 00:35:45,480 Speaker 1: only do they not spend money. But when you automate 621 00:35:45,600 --> 00:35:49,680 Speaker 1: a gun, your sequel could be teenagers spend money. That's well, 622 00:35:50,400 --> 00:35:52,600 Speaker 1: there's a good point because whose money are they going 623 00:35:52,680 --> 00:35:55,200 Speaker 1: to spend? Where's that money going to come from? Wait 624 00:35:55,239 --> 00:35:59,800 Speaker 1: till you get to teenage robots? Oh, I say teenage robots. 625 00:36:00,800 --> 00:36:03,759 Speaker 1: That's just with the the artifact last night we have 626 00:36:03,840 --> 00:36:09,120 Speaker 1: Dad robot. Really, isn't that redundant? Yeah? It had to 627 00:36:09,160 --> 00:36:11,440 Speaker 1: do it taking your cell phone away as well. Are 628 00:36:11,480 --> 00:36:14,360 Speaker 1: you an Apple bull or not? I do think Apple 629 00:36:14,440 --> 00:36:17,280 Speaker 1: is great as a company. As a stock, it feels 630 00:36:17,280 --> 00:36:19,440 Speaker 1: like it's still in a lot of trouble. Do you 631 00:36:19,480 --> 00:36:22,600 Speaker 1: think do you think investors are underestimating the potential for 632 00:36:22,640 --> 00:36:25,760 Speaker 1: a big sell off. I don't think they are anymore. 633 00:36:25,800 --> 00:36:27,840 Speaker 1: I think we've seen enough of volatility for people to 634 00:36:27,920 --> 00:36:29,640 Speaker 1: wake up and realize that we're at the end of 635 00:36:29,680 --> 00:36:31,680 Speaker 1: the cycle and earnings might be down next year and 636 00:36:31,760 --> 00:36:34,680 Speaker 1: rates might be up, and that's going to be a problem. Nicolas, 637 00:36:34,719 --> 00:36:36,839 Speaker 1: thank you so much, particularly on bitcoin there we wanted 638 00:36:36,840 --> 00:36:38,880 Speaker 1: to have a smart conversation and you can always do 639 00:36:39,040 --> 00:36:43,600 Speaker 1: that with data trek researchers. Nicholas Kolas as well. I 640 00:36:43,719 --> 00:36:45,880 Speaker 1: like this where folks, we're not. We're not in the 641 00:36:45,960 --> 00:36:50,239 Speaker 1: interactor Brokers pantheon and studios we usually are. We think 642 00:36:50,280 --> 00:36:57,480 Speaker 1: Interactor Brokers, Internet Interacts Brokers, market lounge store. But the 643 00:36:57,600 --> 00:37:00,239 Speaker 1: coffee there's not as close to the coffee machine here 644 00:37:00,360 --> 00:37:05,200 Speaker 1: in the Interactive Broker's remote location. You're in the acclaimed 645 00:37:05,360 --> 00:37:09,080 Speaker 1: bloom Bird food court. Nicholas is wondering, what are you 646 00:37:09,280 --> 00:37:12,719 Speaker 1: talking about. Well, we're usually Nick in our studio, which 647 00:37:12,800 --> 00:37:15,600 Speaker 1: you know, which is Let de Luxe and fancy and 648 00:37:15,680 --> 00:37:18,320 Speaker 1: all that. But he's got brand new offices, right, and 649 00:37:18,360 --> 00:37:21,279 Speaker 1: they're all mobile. Seriously, right, I mean, isn't that the 650 00:37:21,360 --> 00:37:23,319 Speaker 1: issue that you know, twenty years ago, if you were 651 00:37:23,320 --> 00:37:27,040 Speaker 1: going to start a new company, go buy office space, telephones, 652 00:37:27,120 --> 00:37:28,600 Speaker 1: all that kind of stuff. You don't have to do 653 00:37:28,680 --> 00:37:31,200 Speaker 1: that anymore. Are fixed costs which meean my partner five 654 00:37:31,239 --> 00:37:35,120 Speaker 1: hundred bucks a month. Say that's that's even less than 655 00:37:35,200 --> 00:37:43,000 Speaker 1: your cell phone bill. Bill's plural bill. That Bill does 656 00:37:43,120 --> 00:37:48,560 Speaker 1: not have a mobile phone. Bluetooth. Bluetooth's got the ships 657 00:37:48,640 --> 00:37:51,400 Speaker 1: quota on that book ship. That Bill's got bluetooth in 658 00:37:51,440 --> 00:38:00,120 Speaker 1: this here going around the house to that's very cool, y, 659 00:38:01,840 --> 00:38:05,920 Speaker 1: thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and 660 00:38:06,120 --> 00:38:11,400 Speaker 1: listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast 661 00:38:11,480 --> 00:38:15,680 Speaker 1: platform you prefer. I'm on Twitter at Tom Keene before 662 00:38:15,760 --> 00:38:19,560 Speaker 1: the podcast. You can always catch us worldwide. I'm Bloomberg 663 00:38:19,680 --> 00:38:19,919 Speaker 1: Radio