WEBVTT - The Dollar Should Be Strengthening, Weinberg Says 0:00:00.080 --> 0:00:12.960 Yea. Welcome to the Bloomberg Surveillance Podcast. I'm term Keene 0:00:13.480 --> 0:00:17.560 Jay Leye. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:32.879 Bloomberg dot Com, and of course on the Bloomberg. Are 0:00:32.920 --> 0:00:35.559 we doing this? I'm told we're doing this. The CMEME 0:00:35.680 --> 0:00:39.239 has joined The Bitcoin Revolution Future started trading last night. 0:00:39.280 --> 0:00:41.760 I understand Tom Keane was literally up all night looking 0:00:41.760 --> 0:00:44.920 for arbitrage opportunities, and he'll bring you the latest price 0:00:44.960 --> 0:00:49.120 for our bitcoin futures in just a moment for more 0:00:49.400 --> 0:00:51.279 to get you up to spin. What's sounding in d C, though, 0:00:51.320 --> 0:00:54.840 is Carl Weinberg, the high Frequency Economics founder, charged with 0:00:54.920 --> 0:00:59.840 divorcing his political biases from his economic analysis. Dr Weinberg, 0:01:00.160 --> 0:01:01.680 great to have you with us on a program, Thanks 0:01:01.680 --> 0:01:03.440 for joining us, Thanks for having me talk to me 0:01:03.440 --> 0:01:06.080 about how tough that challenge has been this year. Well, 0:01:06.120 --> 0:01:09.200 you know, the high Frequency Economics were divided. Jimo Sullivan 0:01:09.280 --> 0:01:11.800 is the House Republican and I'm the House Democrat. And 0:01:12.000 --> 0:01:14.440 it's amazing, though this year, how many things we've agreed upon, 0:01:14.720 --> 0:01:17.839 which is unusual, but it's been a very difficult time 0:01:17.880 --> 0:01:21.399 to separate politic politics from economics, that's for sure. Talk 0:01:21.400 --> 0:01:24.040 to me about how you've parked your politics to one 0:01:24.080 --> 0:01:26.759 side of the room and just focused on the economics. 0:01:26.760 --> 0:01:29.120 What are you agreeing on? Well, what we agree on 0:01:29.280 --> 0:01:33.360 is we have some skepticism about stimulating the economy right now, 0:01:33.400 --> 0:01:37.520 with unemployment so low, with the risk of inflation so high, 0:01:37.600 --> 0:01:40.440 and our house view at High Frequency Economics, and it's 0:01:40.440 --> 0:01:44.039 in Jimo Sullivan's notes this morning, is that any stimulus 0:01:44.040 --> 0:01:46.039 to the economy at this point is probably going to 0:01:46.120 --> 0:01:48.120 move the FED to high rates a little bit faster 0:01:48.200 --> 0:01:51.440 than it otherwise would have. And that is an implication 0:01:51.520 --> 0:01:54.280 of this policy that's not being talked about in Washington, 0:01:54.360 --> 0:01:56.600 but one that we talked about in High Frequency. So 0:01:56.680 --> 0:01:58.560 do I think of next year is just the Federal 0:01:58.600 --> 0:02:01.000 Reserve kind of offsetting any of a hating and the 0:02:01.200 --> 0:02:02.800 potential for a matt up, at least in the U. 0:02:02.840 --> 0:02:06.440 S economy is limited. I don't think offsetting is a 0:02:06.480 --> 0:02:09.160 fair way to talk about either their intention, you know, 0:02:09.320 --> 0:02:11.079 or what they're actually going to be able to do. 0:02:11.440 --> 0:02:13.440 I think the FED and Jim writes about this in 0:02:13.480 --> 0:02:17.400 his daily notes today. Um the Fed's job is to 0:02:18.480 --> 0:02:21.480 keep the economy at full employment and to keep inflation 0:02:22.560 --> 0:02:26.320 under control, and anything that threatens that mandate is going 0:02:26.360 --> 0:02:29.200 to cause them to retract stimulus from the economy sooner. 0:02:29.320 --> 0:02:31.280 I just want to bring this up. These are two 0:02:31.360 --> 0:02:35.680 headlines that nobody cares about. But guess what they're coming 0:02:35.720 --> 0:02:38.440 out back to back, and I think, John, it really 0:02:38.480 --> 0:02:42.919 speaks to the tax legislation right on top of each other. 0:02:43.400 --> 0:02:47.520 Hers she confirms packed by amplifies Snack Brands for one 0:02:47.560 --> 0:02:51.640 point six billion, Tiny Penn National or by Las Vegas 0:02:51.639 --> 0:02:55.600 Pinnacle Entertainment for about two point eight billion. But the 0:02:55.600 --> 0:02:57.440 news is that came out at the same moment here 0:02:57.480 --> 0:02:59.920 in the seven or two hour I mean it just 0:03:00.280 --> 0:03:04.080 it really speaks to John, the whole frenzy that we 0:03:04.160 --> 0:03:08.040 might get into here coming off text legislation. Is that 0:03:08.040 --> 0:03:10.120 what we're gonna say? Count more m and a more 0:03:10.200 --> 0:03:12.160 days of sitting here at seven a m. Eastern time 0:03:12.160 --> 0:03:15.800 and just reading out headlines of another acquisition. You know, 0:03:15.840 --> 0:03:18.560 we just had a very interesting conversation on television where 0:03:18.560 --> 0:03:21.760 I asked this question, what are the yes? Well, I 0:03:21.800 --> 0:03:23.960 asked the question, you know, well, what is the implication 0:03:24.040 --> 0:03:25.960 of the tax code for M and A, And what 0:03:26.000 --> 0:03:27.800 he said really got my attention, and I know you're 0:03:27.800 --> 0:03:29.639 gonna be talking to him again in a few minutes. 0:03:29.840 --> 0:03:32.000 He said, you know, well, what happened was that nothing 0:03:32.040 --> 0:03:34.520 stupid happened. So therefore a lot of deals that were 0:03:34.560 --> 0:03:37.800 on hold and anticipation that's something stupid would happen suddenly 0:03:37.800 --> 0:03:40.680 now are coming into play, are are being realized. So 0:03:40.760 --> 0:03:42.680 you know, maybe that's what the implication this is going 0:03:42.720 --> 0:03:45.280 to be the absence of something bad. We start strong 0:03:45.320 --> 0:03:48.040 in the monday, Karl Weinberg with us with high frequency Economics, 0:03:48.040 --> 0:03:50.480 and of course Mr fry Sack, we'll join us a 0:03:50.520 --> 0:03:53.880 bit on Fox Disney, CDs at UH and the rest 0:03:53.920 --> 0:03:58.000 of ramifications for Global Wall Street, Bloomberg Surveillance. This morning 0:03:58.040 --> 0:04:01.120 has always brought you by Investco. Learn how invest gooes. 0:04:01.240 --> 0:04:05.800 Pure focus on investing, diversity of thought, and passion to 0:04:05.880 --> 0:04:08.960 exceed can help you get more out of life. Visit 0:04:09.040 --> 0:04:14.400 investco dot com slash more out of life again. The 0:04:14.440 --> 0:04:17.320 futures up nine. Uh, you know, John, I'm sorry, I'm 0:04:17.320 --> 0:04:22.240 on the watch twenty four eight zero nine on futures 0:04:22.720 --> 0:04:24.719 and the vix crushing down. I mean, we're not to 0:04:24.760 --> 0:04:27.760 an eight handle, but nine point three six. Get your 0:04:28.600 --> 0:04:32.400 bullmarket attention. I thought you were on watch today. Yeah, 0:04:32.440 --> 0:04:34.560 I am, sort of. I had to quote up the 0:04:34.720 --> 0:04:39.880 Dow up twelve months a year to date. Excuse me, 0:04:40.160 --> 0:04:42.600 let me do twelve months trailing. Forget about year to date, 0:04:42.680 --> 0:04:46.080 let's do um uh one one year. There it is 0:04:46.560 --> 0:04:52.560 the Dow up twelve months trailing. I think yeah, and 0:04:52.839 --> 0:04:58.080 uh spu twelve months trailing? Bitcoin up again? You pushed 0:04:58.080 --> 0:05:02.680 it higher, John with your discourse nineteen thousand to sixteen 0:05:03.279 --> 0:05:06.360 on bitcoin. I understand on the c m A you're 0:05:06.400 --> 0:05:11.200 buying five bitcoins per contract. I just said the size 0:05:11.200 --> 0:05:13.160 of the contract is a lot bigger on the CMA 0:05:13.240 --> 0:05:16.920 than the Sea bow. Yeah. I don't really understand it. 0:05:16.920 --> 0:05:19.320 I don't, you know. I defer to Matt Miller in Berlin. 0:05:19.640 --> 0:05:22.440 Does Carl Weinberg understand it? Does it make sense to 0:05:22.480 --> 0:05:24.920 your Carl? You know, I'm old enough to remember dot 0:05:24.960 --> 0:05:27.880 com stocks, and I'm thinking that what we're seeing in 0:05:27.920 --> 0:05:30.200 bitcoin is a lot like what we saw in the 0:05:30.240 --> 0:05:32.680 dot com bubble and in other bubbles. I mean, people 0:05:32.800 --> 0:05:35.720 used to think that tulips had a lot of value. Also, Uh, 0:05:35.960 --> 0:05:38.279 I just don't get it with bitcoin at this point. 0:05:38.320 --> 0:05:40.680 It's certainly it's a very small part of the economy. 0:05:40.720 --> 0:05:42.880 It's a very small part of the market. It's a 0:05:42.920 --> 0:05:44.720 lot of excitement for the last week of the year 0:05:44.760 --> 0:05:46.359 when there's not a lot of news going on, but 0:05:46.680 --> 0:05:48.159 at the end of the day, I just don't see 0:05:48.160 --> 0:05:51.160 the fundamentals behind it. As it becomes institutionalized though, and 0:05:51.240 --> 0:05:53.520 lands on exchanges like the Sea Bow and the cm A. 0:05:54.320 --> 0:05:56.640 Is there a risk that this bleeds if something goes 0:05:56.680 --> 0:05:59.680 wrong and bleeds out into other asset classes, or is 0:05:59.720 --> 0:06:02.760 it just still too small count Well, first of all, 0:06:02.760 --> 0:06:04.520 we have no history to look back on to to 0:06:04.560 --> 0:06:06.120 see where this is going to go, so we're all 0:06:06.160 --> 0:06:08.600 just kind of speculating about where it's going. And it 0:06:08.720 --> 0:06:11.240 might get very, very, very big. But it seems to 0:06:11.279 --> 0:06:13.120 me that it has to be embraced by the big 0:06:13.160 --> 0:06:16.680 financial institutions for the banking system to be useful. I 0:06:16.720 --> 0:06:19.159 think what I hear more talk about these days is 0:06:19.200 --> 0:06:23.960 talk about central banks starting to deal with digital currency 0:06:24.480 --> 0:06:27.479 rather than going adopting bitcoin as their digital currency and 0:06:27.520 --> 0:06:30.760 going to digital versions of settlement and transactions in their 0:06:30.800 --> 0:06:33.520 own currencies. Now we've heard two central bank governors say 0:06:33.560 --> 0:06:35.240 that that's not going to happen in the last couple 0:06:35.240 --> 0:06:38.200 of days Australia and Canada. But I don't think that 0:06:38.200 --> 0:06:40.520 that's such a far fetched idea. I think that's a 0:06:40.600 --> 0:06:44.479 much more likely possibility to gain traction than bitcoin, which 0:06:44.560 --> 0:06:48.000 is not backed by anything coming out. Is something that 0:06:48.080 --> 0:06:50.839 we've tried to question this program is where the regional 0:06:50.880 --> 0:06:53.680 activity for bitcoin trating is really taking place. It seems 0:06:53.680 --> 0:06:57.599 to be really really concentrated in Asia, in Japan, in 0:06:57.640 --> 0:07:01.000 South Korea. What's behind that count I have no idea, 0:07:01.200 --> 0:07:04.080 and I honestly don't know how anyone has any hard 0:07:04.120 --> 0:07:07.440 statistics on any of this at this point. And certainly 0:07:07.480 --> 0:07:09.240 we can't look back at the trends of the last 0:07:09.240 --> 0:07:11.160 ten or fifteen years and say, well, you know, this 0:07:11.240 --> 0:07:14.200 is how it went for this particular reason, were completely 0:07:14.280 --> 0:07:18.200 unexplored territory right now, and again, my view is is 0:07:18.520 --> 0:07:21.440 pretty firm about this. It's a very speculative currency, it's 0:07:21.440 --> 0:07:23.800 a very speculative commodity. And tell him that something you've 0:07:23.800 --> 0:07:27.000 noted as well, just the activity in Japan and South 0:07:27.080 --> 0:07:29.400 Korea that's dominated us. Right. If somebody said to me, 0:07:29.520 --> 0:07:31.680 right now, what's your major focus, I would say Korea. 0:07:32.120 --> 0:07:34.440 I'm trying to read it everything I can and I 0:07:34.480 --> 0:07:37.720 can't say enough about Tim Coulpen writing for Bloomberg View, 0:07:38.120 --> 0:07:44.239 who has a fabulous, almost visceral understanding of non Japan, 0:07:44.320 --> 0:07:48.920 non China, Asian, but Korea and falling in the Gaia politics. 0:07:48.920 --> 0:07:50.920 So you're looking at I'm looking to Korea in the 0:07:50.960 --> 0:07:55.280 market forenzy. It's cultural, as Carl mentioned, its cultural, it's behavioral. 0:07:56.160 --> 0:07:59.120 I'm curious about not only China, Japan, Korea, but the 0:07:59.200 --> 0:08:02.160 nuances but between the three and on this Monday morning 0:08:02.200 --> 0:08:06.320 with nineteen thousand two to two on bitcoin, and let 0:08:06.320 --> 0:08:08.520 me tell you, folks on a log chart, it's a 0:08:08.560 --> 0:08:11.400 moon shot and most focused on Korea. Could be wrong 0:08:11.440 --> 0:08:13.240 on that, but that's where I am right now. Let 0:08:13.240 --> 0:08:16.960 me do a data check here with Carl Weinberg, excuse me. 0:08:17.040 --> 0:08:20.040 Futures up ten deal futures up a hundred and fifty 0:08:20.040 --> 0:08:24.560 two UH tenure yield UH two point three seven up 0:08:24.560 --> 0:08:27.520 to basis points, so lifted yields here as well. We 0:08:27.560 --> 0:08:30.640 did that within sharp curve steepening on Friday. Right now 0:08:31.720 --> 0:08:35.400 the curve fifty two basis points is recovered. Nice. I'm 0:08:35.400 --> 0:08:37.240 gonna call it a churn into the market really here 0:08:37.440 --> 0:08:40.320 with gold up four dollars twelve sixty one. Uh, the 0:08:40.400 --> 0:08:42.079 ounce as well, John, what are you looking at? What's 0:08:42.120 --> 0:08:45.040 sterling doing? Nothing? Right? It's a little bit stronger against 0:08:45.080 --> 0:08:47.800 more broadly a week dollar in J ten. Today the 0:08:47.840 --> 0:08:51.120 dollar weaker against nine out of the ten major currencies 0:08:51.120 --> 0:08:53.199 in J ten space. And that's the story of the 0:08:53.240 --> 0:08:55.160 year as well. Can I ask you a question, all right? 0:08:55.240 --> 0:08:57.320 If this tax thing is so good for the US 0:08:57.360 --> 0:08:59.440 economy and everybody is so excited about it and so 0:08:59.520 --> 0:09:01.880 surprised about it, why isn't the dollars stronger this morning? 0:09:01.880 --> 0:09:03.319 I don't know, Kyl. I think we seem to be 0:09:03.840 --> 0:09:06.640 trading on twin deficits. It feels like a very E 0:09:06.800 --> 0:09:08.720 M type story to me, and I keep hearing that 0:09:08.760 --> 0:09:10.800 over the last couple of weeks as well. I just 0:09:10.880 --> 0:09:12.880 I just don't get the weakness of the dollar right now. 0:09:12.880 --> 0:09:15.280 It seems like the dollars should generally be strengthening and 0:09:15.520 --> 0:09:18.000 everything is against it, and I don't see why. Carl Weinberg, 0:09:18.040 --> 0:09:19.679 thank you so much for being with a season with 0:09:19.800 --> 0:09:40.120 high frequency economics. I'm being incredibly rude here. You'd think 0:09:40.160 --> 0:09:43.080 John Farrell would bring in the United Kingdom Council General 0:09:43.400 --> 0:09:46.120 to New York with, without question, the most important British 0:09:46.120 --> 0:09:50.439 shure besides John apologizing to me, that's me apologizing to you. 0:09:50.480 --> 0:09:54.200 But I'm gonna ask one quick question here before John 0:09:54.200 --> 0:09:58.400 gets two important issues. Uh, Anthony Phillipson with us you 0:09:58.559 --> 0:10:01.960 just finished as high aishion or to Singapore for the 0:10:02.040 --> 0:10:06.080 United Kingdom government. There is a primal wish of many 0:10:06.160 --> 0:10:09.880 British Ers to get the empire back. We're going to 0:10:10.000 --> 0:10:13.320 be global trade, We're going to do the empire back. 0:10:13.960 --> 0:10:17.520 What's it like to hear that talk when you visit 0:10:17.559 --> 0:10:22.360 the Shaney Cemetery near the Singapore airport, or the cemetery 0:10:22.440 --> 0:10:25.280 to the north where so many Britishers dined. How do 0:10:25.440 --> 0:10:29.200 you respond when you hear Brexitters say are going to 0:10:29.240 --> 0:10:33.040 bring the umpire back? Well, thank you very much. Indeed, 0:10:33.120 --> 0:10:34.680 it's a great pleasure to be with you this morning. 0:10:34.720 --> 0:10:37.079 And that's not quite what the Brexits are saying, and 0:10:37.080 --> 0:10:38.840 it certainly know what the British government is saying. What 0:10:38.880 --> 0:10:42.160 we're saying is we're going to deliver a smooth, constructive 0:10:42.160 --> 0:10:44.520 exit from the European Union. We're going to deliver the 0:10:44.520 --> 0:10:46.199 the will of the British people is expressed in the 0:10:46.240 --> 0:10:48.719 referendum in June last year, and then we're going to 0:10:48.760 --> 0:10:53.160 go and create a new free trading Yes, buccaneering in 0:10:53.160 --> 0:10:55.800 the way in the words of some yes, but this 0:10:55.880 --> 0:10:57.440 is going to be based on partnerships. This is going 0:10:57.480 --> 0:10:59.920 to be based on forward looking the economy of the future. 0:11:00.480 --> 0:11:02.400 We're not looking back because we're very proud of our history, 0:11:02.440 --> 0:11:04.160 but lots of countries very proud of their history. We're 0:11:04.200 --> 0:11:06.439 very proud of our old relationships, including especially with the 0:11:06.520 --> 0:11:09.120 United States. This is about looking forward, not looking back. 0:11:09.200 --> 0:11:11.360 So naturally, Anthony, I have an English accent, so people 0:11:11.360 --> 0:11:13.360 always ask me in New York what's going on with Brexit? 0:11:13.400 --> 0:11:15.920 And I should probably just say call Anthony, because you're 0:11:15.920 --> 0:11:17.280 the guy that's got to turn around to people and 0:11:17.280 --> 0:11:19.440 tell them here what is actually happening with Brexit. So 0:11:19.520 --> 0:11:21.480 you tell us what is going on because from the 0:11:21.480 --> 0:11:26.520 New York looking into Europe it looks like a total mess. Well, 0:11:26.679 --> 0:11:28.959 we're engaged in the process. The Primister kicked off when 0:11:29.000 --> 0:11:31.000 she sent her article fifty letters we call it in 0:11:31.040 --> 0:11:35.880 March this year. Last week, on Friday, in Brussels. The 0:11:36.559 --> 0:11:39.480 stage moved on to a really significant moment where we 0:11:39.480 --> 0:11:42.640 we concluded phase one, as we've called it, the withdrawal process. 0:11:43.120 --> 0:11:45.199 Um it's going to be a long process from here, 0:11:45.200 --> 0:11:48.160 but we've made good progress. And the reason why this 0:11:48.200 --> 0:11:51.199 is significant is there are lots of people commenting on Brexit. 0:11:52.000 --> 0:11:54.880 We haven't given a running commentary on the negotiations quite deliberately, 0:11:55.360 --> 0:11:57.440 but Friday was a significant moment and I think that 0:11:57.480 --> 0:12:00.000 was recognized in statements from the Prime Minister was recognized 0:12:00.040 --> 0:12:02.560 and statements from Donald Tusk, the President of the Council, 0:12:02.640 --> 0:12:04.720 and from John clude Younger the President's Commission, and indeed 0:12:04.720 --> 0:12:07.800 other other European leaders. Now we move on to the 0:12:07.880 --> 0:12:11.400 next phase of discussion, starting crucially with the question about 0:12:11.400 --> 0:12:13.960 how we start talking about the future trade partnership and 0:12:14.000 --> 0:12:16.439 then we start talking about how we implement that agreement 0:12:16.440 --> 0:12:18.400 between us moving forward. It looks like the UK is 0:12:18.400 --> 0:12:20.160 just going to be told what they're going to get 0:12:20.360 --> 0:12:23.600 rather than ask and receive that. The feeling you get 0:12:23.600 --> 0:12:25.880 through phase one is that the UK didn't really achieve 0:12:25.880 --> 0:12:29.600 any concessions from the European side whatsoever. What concessions do 0:12:29.600 --> 0:12:32.480 you think the UK did get from the European Union 0:12:32.480 --> 0:12:33.880 and what do you think they're going to get in 0:12:33.920 --> 0:12:36.120 phase two. Well, I think if we look at phase one, 0:12:36.280 --> 0:12:38.040 this is we've always said it's going to be negotiation. 0:12:38.080 --> 0:12:40.319 I would say that we achieved some very significant moments. 0:12:40.320 --> 0:12:43.559 We achieved a first settlement on the issue of citizens rights, 0:12:43.679 --> 0:12:46.000 both for EU citizens in the UK, UK citizens in 0:12:46.040 --> 0:12:48.720 the EU. We have always said that in terms of 0:12:48.720 --> 0:12:50.920 the financial settlement, we would honor our commitments, and what 0:12:50.960 --> 0:12:52.760 we did was we worked through in great detail with 0:12:52.800 --> 0:12:55.960 European partners what those what those commitments are going to be, 0:12:56.320 --> 0:12:58.520 and in the context of Ireland, which of course crucial 0:12:58.800 --> 0:13:02.120 for the people of Northern Ireland, we agreed that we 0:13:02.120 --> 0:13:03.760 would move forward in a way that would not return 0:13:03.800 --> 0:13:05.400 to the borders of the past. I don't think it's 0:13:05.400 --> 0:13:07.920 particually helpful to look at concessions or wins or losses. 0:13:08.200 --> 0:13:10.880 This is about a negotiation and agreed way forward and 0:13:10.880 --> 0:13:12.319 that's what we are doing. So there's a lot of 0:13:12.360 --> 0:13:15.120 banks here on Wall Street that I'm sure asking you 0:13:15.120 --> 0:13:16.880 have a lot of questions. What is going to happen 0:13:16.920 --> 0:13:19.520 with the relationship with the e U twenty seven and 0:13:19.559 --> 0:13:23.320 the United Kingdom Post and how are they going to 0:13:23.320 --> 0:13:27.600 continue to operate Can they operate after in the same 0:13:27.640 --> 0:13:31.920 way they operated before? So I think what I would 0:13:31.920 --> 0:13:33.240 say is that what they will be able to do 0:13:33.280 --> 0:13:35.040 is to operate in the city of London as one 0:13:35.080 --> 0:13:36.800 of the great financial centers of the world, along of 0:13:36.800 --> 0:13:39.560 course with New York. They will continue to be operating 0:13:39.720 --> 0:13:43.440 in a in a climate that will be a wonderful 0:13:43.440 --> 0:13:47.439 location for doing business with With the European Union. Then 0:13:47.480 --> 0:13:51.199 at seven UM, one of the former German finance minister 0:13:51.280 --> 0:13:54.240 himself said the other day that what Europe needs is 0:13:54.240 --> 0:13:56.280 a strong London. They don't need to see London moving 0:13:56.280 --> 0:13:58.440 to other places. So the banks will be there, The 0:13:58.440 --> 0:14:00.280 banks will be there, There won't go anywhere. And we 0:14:00.280 --> 0:14:02.720 all love London because London is fantastic. I love London, 0:14:02.920 --> 0:14:04.440 but I'd like to know if they're going to continue 0:14:04.480 --> 0:14:07.319 to have passporting. Are they're going to continue to have passporting, 0:14:07.360 --> 0:14:09.520 Will they get that concession from Europe, Because when we 0:14:09.520 --> 0:14:11.880 talk about concessions, I think it is important to know 0:14:11.960 --> 0:14:15.480 whether you get that concession from the EU for the city. 0:14:15.800 --> 0:14:18.120 What the negotiation will deliver is a new set of 0:14:18.200 --> 0:14:21.520 arrangements between London and the Eurozone in London and the 0:14:22.320 --> 0:14:24.520 seven That is exactly what we're about to work out. 0:14:24.960 --> 0:14:27.440 The Chancellor himself gave a speech in the city the 0:14:27.440 --> 0:14:29.680 other day where he made clear that there is an 0:14:29.680 --> 0:14:32.280 absolute priority of the British government to deliver that new relationship. 0:14:32.440 --> 0:14:34.320 What exactly it looks like, we don't know. That's what 0:14:34.360 --> 0:14:37.280 the negotiation will deliver. You've got a hard job, Anthony Phillipson. 0:14:37.480 --> 0:14:40.000 They knew UK. A Council General to New York and 0:14:40.040 --> 0:14:44.200 Director General of International Trade North America, Tom Kane, you're forgiven. 0:14:44.320 --> 0:14:46.880 Thank one of all. We'd love to have you back 0:14:46.920 --> 0:14:48.880 for a longer time. I would love to come back. 0:14:49.160 --> 0:14:53.160 There's so much, so much to talk about here, Council General, 0:14:53.200 --> 0:15:10.000 thank you so much. Without further ado, we're gonna continue 0:15:10.000 --> 0:15:12.240 with Robert Profuseck of Jones Day and I'm going to 0:15:12.360 --> 0:15:15.440 rip up the stript script because Bob, since just emailed in, 0:15:15.520 --> 0:15:18.880 Bob Sinch is an FX dollar guy. Is one of 0:15:18.920 --> 0:15:22.520 the outcomes of tax reform that foreign investment looks to 0:15:22.600 --> 0:15:26.600 come into the United States for complete acquisition or even 0:15:26.640 --> 0:15:30.840 for some kind of minority interest in American assets. That's 0:15:30.960 --> 0:15:34.520 quite possible that a short term impact has gotta be stimulative. 0:15:34.600 --> 0:15:37.960 There's gonna be money coming back by US companies. It's 0:15:39.200 --> 0:15:42.000 there's there's gonna be But if I'm a European multinational, 0:15:42.040 --> 0:15:44.560 I mean, John, there's Unilever and they're doing spreads business, 0:15:44.560 --> 0:15:48.720 which I you know, don't understand. If I'm a foreign company, 0:15:48.760 --> 0:15:50.880 do I want to bring money back into the United 0:15:50.920 --> 0:15:53.600 States and by minority or majority interests, Yes, you can, 0:15:53.720 --> 0:15:56.120 because it's just the rate differential is going to be 0:15:56.120 --> 0:15:58.440 different and you don't have to go to this structure. 0:15:58.440 --> 0:15:59.960 I mean, if you look at the structure of many 0:16:00.080 --> 0:16:02.480 non U S comp you know, we're we're real critical 0:16:02.600 --> 0:16:04.840 US companies with inversions and stuff. You look at the 0:16:04.880 --> 0:16:07.320 other side, you look at their corporate structure looks like 0:16:07.360 --> 0:16:09.320 you open the back of an old time TV set. 0:16:09.440 --> 0:16:12.360 It was so complicated to try to deal with this 0:16:12.760 --> 0:16:16.000 high US tax rate. The dollar has had an awful year, Bob, 0:16:16.480 --> 0:16:18.640 and we often ask us sounds whether that really moves 0:16:18.640 --> 0:16:20.880 the donald for the C suite. Did they sit there 0:16:20.920 --> 0:16:23.240 and say other in Europe or an Asia and say, 0:16:23.280 --> 0:16:25.200 look at the performance of the dollar. Things got cheaper. 0:16:25.440 --> 0:16:29.520 America's on sale for sure because and that's a financing arbitrage. 0:16:29.600 --> 0:16:32.080 If they're you know, financing it from what sure they 0:16:32.080 --> 0:16:34.360 can do it. And one of the things about again 0:16:34.440 --> 0:16:37.280 looking out from the US perspective of the European bring 0:16:37.280 --> 0:16:39.760 more money back in. There'll be more money here. There's 0:16:39.760 --> 0:16:41.440 been a lot of I mean, when you're the average 0:16:41.440 --> 0:16:44.400 CEO says I got two M and A possibilities in 0:16:44.440 --> 0:16:46.680 the old days. If when we're off shore, you did 0:16:46.720 --> 0:16:48.880 it because you wanted to use up that off shore 0:16:48.960 --> 0:16:52.480 catch um Bob, I want you to define right now 0:16:52.760 --> 0:16:57.680 why a hundred jillion dollars at private equity is different 0:16:57.680 --> 0:17:01.280 than a hundred jillion dollars anywhere you look at pots 0:17:01.320 --> 0:17:04.679 of money. How do you treat private equity pots of 0:17:04.680 --> 0:17:08.800 money different? Well, there is that's about the right number 0:17:08.800 --> 0:17:11.280 for private equity. There's an amazing amount of capital that's 0:17:11.320 --> 0:17:13.360 been committed when you look at the fundraising this year, 0:17:13.480 --> 0:17:16.400 but as cash cash it's been astonishing. The difference is 0:17:16.760 --> 0:17:18.639 they have to put that money or they want to 0:17:18.680 --> 0:17:20.920 put that money to work. Now that doesn't mean it 0:17:21.040 --> 0:17:22.760 is burning a hole in their pocket they're gonna do 0:17:22.800 --> 0:17:26.280 dumb deal, but it does mean they're in the deal business. 0:17:26.359 --> 0:17:29.159 Companies are in their business and deals that maybe a 0:17:29.160 --> 0:17:31.800 part of it, whereas a private equity guy that is 0:17:31.920 --> 0:17:35.240 hit his business is putting that capital. Am I right? 0:17:35.400 --> 0:17:37.720 You know? Pick on KKR, there's a general partner, there's 0:17:37.760 --> 0:17:40.560 lots of limited partners whatever that put money in. They've 0:17:40.560 --> 0:17:43.320 got a big, big pot of money. And then do 0:17:43.400 --> 0:17:47.199 they pick an industry category and say, go review a 0:17:47.280 --> 0:17:49.720 hundred companies and let's see which five are gonna bid 0:17:49.800 --> 0:17:54.600 for the Absolutely there's some funds that are industry specific. 0:17:54.640 --> 0:17:58.040 The KKR is the Blackstones, the big ones. They're more generic. 0:17:58.200 --> 0:18:00.720 What they do very often look at where things are going, 0:18:01.320 --> 0:18:03.919 and you know, they're just like everybody else. There are 0:18:03.960 --> 0:18:06.320 things that are hot for a reason. Now right now, 0:18:06.760 --> 0:18:11.200 I know this sounds it's kind of dumb, but it's 0:18:11.280 --> 0:18:13.879 hard to find an industry that's not hot. In M 0:18:13.920 --> 0:18:16.560 and A, it really well, again and again John Ferroll 0:18:16.600 --> 0:18:20.400 three headlines in the last hour, profuse driving the conversation. 0:18:20.800 --> 0:18:23.760 Penn National to buy Pinnacle, David Wilson will have more 0:18:23.760 --> 0:18:26.800 and it's Hershey confirms they're gonna buy Amplify snack brains. 0:18:26.840 --> 0:18:29.560 I don't even know what that is. Campbell's to buy 0:18:29.920 --> 0:18:33.000 Snyder's Lands. Shout out to Mario Gabelli who nailed that. 0:18:33.200 --> 0:18:36.360 As always, I'm struggling to see why these companies need 0:18:36.800 --> 0:18:39.600 private equity financing at this point when the debt markets 0:18:39.640 --> 0:18:41.920 wide open. When you think about when these companies were 0:18:41.960 --> 0:18:45.199 formed Bob the car Loves of this world KKR, the 0:18:45.240 --> 0:18:48.160 opportunity set in front of them at the time is very, 0:18:48.440 --> 0:18:50.600 very different to the opportunity said in front of them now. 0:18:50.640 --> 0:18:52.480 You've talked about them needing to put the cash to work. 0:18:52.720 --> 0:18:54.720 They're struggling to find places to put a cash to work, 0:18:54.760 --> 0:18:56.520 aren't they. Yeah, they are. And one of the things 0:18:56.520 --> 0:18:59.080 they're doing many of in fact, almost all of them, 0:18:59.119 --> 0:19:03.240 they're they're not just looking at traditional LBO transactions. A 0:19:03.240 --> 0:19:05.800 lot of them are doing financing. Um. While the debt 0:19:05.800 --> 0:19:08.199 markers are fabulous, if you're below a triple B, not 0:19:08.320 --> 0:19:10.639 so good. It's hard to get money because of the 0:19:10.680 --> 0:19:13.439 pressure on the banks. So guess who shows up in 0:19:13.480 --> 0:19:17.680 that private equity there. Almost every private equity firm now 0:19:18.119 --> 0:19:22.960 is doing alternative financings, so called special situations, which usually 0:19:23.000 --> 0:19:26.639 means either distress or at least below investment grade. So 0:19:26.680 --> 0:19:28.560 they're doing everything else they've got a lot of money 0:19:28.600 --> 0:19:32.439 to allocate. Even though a lot of the major um 0:19:32.640 --> 0:19:36.159 PE investors, like the public pension funds and and and 0:19:36.200 --> 0:19:39.439 the like, have said they're dialing back, but they really haven't. 0:19:39.560 --> 0:19:42.240 In the real world, they say it, but they this 0:19:42.280 --> 0:19:45.080 is an asset class you can't pass up, and it's huge. 0:19:45.119 --> 0:19:48.040 I haven't I don't know the specifics, but I'm certain 0:19:48.680 --> 0:19:52.960 there are four or five fundraising efforts where they raised 0:19:52.960 --> 0:19:56.600 over ten billion dollars. The problems when when KKR started out, 0:19:56.720 --> 0:19:59.359 if they could get to five hundred million dollars, that 0:19:59.440 --> 0:20:01.639 was a big thing. The problem, though, is it starts 0:20:01.640 --> 0:20:04.119 from the top. Investors are looking cross asset right now, 0:20:04.160 --> 0:20:06.200 and they're looking at opportunities and they're struggling to find 0:20:06.240 --> 0:20:08.119 strong returns even in high yield where you get what 0:20:08.240 --> 0:20:11.480 five percent now historically incredibly low. So they're sitting there 0:20:11.520 --> 0:20:13.480 and they say, where can I put my money. Let's 0:20:13.480 --> 0:20:15.080 give it to someone else, and let's give it a 0:20:15.080 --> 0:20:17.000 private equity and hopefully they can come up with a 0:20:17.040 --> 0:20:19.879 better idea. So their access to cash is absolutely fine. 0:20:19.920 --> 0:20:21.720 They've got loads of it. They just done what to 0:20:21.720 --> 0:20:23.400 do with it? Do they? And you raise the point 0:20:23.440 --> 0:20:26.639