1 00:00:00,080 --> 00:00:13,600 Speaker 1: Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom keene Jaileye. 2 00:00:13,640 --> 00:00:16,640 Speaker 1: We bring you insight from the best in economics, finance, 3 00:00:16,720 --> 00:00:23,200 Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,320 --> 00:00:32,239 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Let's 5 00:00:32,280 --> 00:00:34,520 Speaker 1: just want to zoom in on the FX market first 6 00:00:34,520 --> 00:00:37,440 Speaker 1: of all and bring in hands Eradiquet Morgan Stanley Investment Management, 7 00:00:37,440 --> 00:00:41,400 Speaker 1: Global head of ffex Strategy and he joins us from London. Hands, 8 00:00:41,479 --> 00:00:45,839 Speaker 1: let's begin with Turkey. What constitutes a currency crisis and 9 00:00:45,920 --> 00:00:50,680 Speaker 1: how close are we to want in Turkey? So honestly, 10 00:00:50,720 --> 00:00:54,400 Speaker 1: the recent movements in the currency had been a quiet 11 00:00:54,400 --> 00:00:56,520 Speaker 1: to dramatic and you have to put that into context 12 00:00:56,560 --> 00:01:00,480 Speaker 1: of really interest rates. So we're analyzing for an exchange 13 00:01:00,480 --> 00:01:02,520 Speaker 1: we have always to think about what type of rear 14 00:01:02,600 --> 00:01:06,840 Speaker 1: rate level do you require to cover up for internal 15 00:01:06,920 --> 00:01:12,280 Speaker 1: and external imbalances? And the Turkish rear rate and environment 16 00:01:12,360 --> 00:01:15,600 Speaker 1: is obviously too low for the taste of investors and 17 00:01:15,680 --> 00:01:17,840 Speaker 1: that is so why is the exchange rate is currently 18 00:01:17,959 --> 00:01:21,040 Speaker 1: selling off now when you look into what is priced 19 00:01:21,080 --> 00:01:23,800 Speaker 1: in on rate hikes in talk is about two on 20 00:01:23,880 --> 00:01:27,280 Speaker 1: that basis points. So in order to stabilize the exchange rate, 21 00:01:27,560 --> 00:01:31,560 Speaker 1: you would have to see rate hikes going beyond what 22 00:01:31,720 --> 00:01:34,319 Speaker 1: is currently priced in in the in the front end 23 00:01:34,360 --> 00:01:37,920 Speaker 1: of the curve. Now that obviously it does require a 24 00:01:37,959 --> 00:01:40,080 Speaker 1: decision by the Center Bank to do so well, and 25 00:01:40,120 --> 00:01:43,280 Speaker 1: it's amazing to me that the Central Bank hasn't moved yet. 26 00:01:43,319 --> 00:01:45,400 Speaker 1: And it's not just me. A lot of traders are saying, 27 00:01:45,520 --> 00:01:47,680 Speaker 1: what is the what are they waiting for? What do 28 00:01:47,680 --> 00:01:51,640 Speaker 1: they need to raise rates? If they don't raise rates, 29 00:01:51,640 --> 00:01:55,720 Speaker 1: how far can this go? Well, there's obviously the ultimate question, 30 00:01:55,760 --> 00:01:56,960 Speaker 1: but you have as well to put that in the 31 00:01:57,040 --> 00:02:02,040 Speaker 1: context of other circumstances or that is, actually the vulnerability 32 00:02:02,040 --> 00:02:05,520 Speaker 1: which is commonly exposed in Turkey is as well a 33 00:02:05,600 --> 00:02:08,880 Speaker 1: result of US dollar strengths, which we are now experiencing. 34 00:02:09,320 --> 00:02:13,079 Speaker 1: Since so it's hard to call this that. I mean, 35 00:02:13,240 --> 00:02:16,840 Speaker 1: the lyric has fallen twenty one percent so far this year. 36 00:02:17,480 --> 00:02:21,080 Speaker 1: Japanese investors who had previously been bullish are now pulling back, 37 00:02:21,080 --> 00:02:24,200 Speaker 1: cutting their losses, getting out of there. Uh, this isn't 38 00:02:24,240 --> 00:02:27,320 Speaker 1: just a dollar strength story. No, no, no, no no. 39 00:02:27,400 --> 00:02:30,919 Speaker 1: You have actually to think about under which circumstances can 40 00:02:30,960 --> 00:02:35,400 Speaker 1: you fund for an imbalance of funding needs in capital 41 00:02:35,480 --> 00:02:39,160 Speaker 1: importance and under which circumstances is becoming more difficult. And 42 00:02:39,440 --> 00:02:41,720 Speaker 1: the situation was obviously in the past a few years 43 00:02:41,720 --> 00:02:45,760 Speaker 1: it was there were situations where capital important into higher 44 00:02:45,800 --> 00:02:49,240 Speaker 1: yielding environment, so we're less difficult a than they emerged 45 00:02:49,480 --> 00:02:52,799 Speaker 1: from Fabry onwards. And of course there were then other 46 00:02:52,840 --> 00:02:56,120 Speaker 1: effectors which are much more specific to Turkey kicking in. 47 00:02:56,720 --> 00:03:01,160 Speaker 1: But my point here is that are to be easier 48 00:03:01,280 --> 00:03:04,920 Speaker 1: for for authorities to stabilize the exchange rate within an 49 00:03:05,000 --> 00:03:08,120 Speaker 1: environment of US solar weakness. When you have a dollar 50 00:03:08,160 --> 00:03:13,600 Speaker 1: strengths generally are happening out or happening, then that effort 51 00:03:13,600 --> 00:03:16,359 Speaker 1: is becoming a much more difficult. That is the point 52 00:03:16,400 --> 00:03:18,239 Speaker 1: I wanted to make. It's a good point hands. And 53 00:03:18,240 --> 00:03:21,040 Speaker 1: when you overload the credibility issue here as well, you've 54 00:03:21,040 --> 00:03:24,320 Speaker 1: got investors wondering whether the central Bank could indeed deliver 55 00:03:24,360 --> 00:03:26,440 Speaker 1: a rate car never mind a rate hike after the 56 00:03:26,480 --> 00:03:29,840 Speaker 1: election in Turkey, a real credibility issue there. Two hands, 57 00:03:29,840 --> 00:03:32,799 Speaker 1: what's the contagion risk here? If there is any asel hands? 58 00:03:34,000 --> 00:03:35,680 Speaker 1: So what you have seen in the merchant market so 59 00:03:35,720 --> 00:03:39,080 Speaker 1: far is that a bond equity and credit had been 60 00:03:39,320 --> 00:03:43,560 Speaker 1: multi selling off, but it had been not astromatic as 61 00:03:43,600 --> 00:03:45,720 Speaker 1: you would assume if you look at the exchange rates. 62 00:03:45,720 --> 00:03:48,560 Speaker 1: So what happened here is that the value at risk 63 00:03:48,800 --> 00:03:52,680 Speaker 1: in a merchant market portfolio also got reduced by people 64 00:03:52,720 --> 00:03:55,880 Speaker 1: are hitching the Curren series. Now you know that hitching 65 00:03:55,920 --> 00:04:00,400 Speaker 1: in the fixer emerging market environment is expensive. That actually 66 00:04:00,440 --> 00:04:04,480 Speaker 1: means we have currently unsustainable portfolio structure. So it actually 67 00:04:04,520 --> 00:04:07,120 Speaker 1: means that are either at one point you have to 68 00:04:07,120 --> 00:04:11,160 Speaker 1: lift the hatch or alternatively you need to reduce your 69 00:04:11,200 --> 00:04:15,040 Speaker 1: holdings in equities, bonsor and credit. And that decision is 70 00:04:15,040 --> 00:04:17,159 Speaker 1: going to come up in the next few days and 71 00:04:17,279 --> 00:04:20,120 Speaker 1: a lot. Again, it is going to depend how the 72 00:04:20,200 --> 00:04:22,800 Speaker 1: general perception of cs dollar is. What do you think 73 00:04:22,839 --> 00:04:25,840 Speaker 1: about a global risk appetite? Are we in an environment 74 00:04:25,839 --> 00:04:29,800 Speaker 1: where people put money at work or not? And we 75 00:04:29,880 --> 00:04:33,200 Speaker 1: have as well then to think about the complicating issue 76 00:04:33,360 --> 00:04:37,480 Speaker 1: of the euro. What is currently happening in Italy does 77 00:04:37,560 --> 00:04:40,400 Speaker 1: not help the issue. Yeah, you know, you make a 78 00:04:40,400 --> 00:04:44,800 Speaker 1: really important point about how any moves to stabilize or 79 00:04:44,880 --> 00:04:49,039 Speaker 1: even sort of edify developing economies really hinges on the 80 00:04:49,120 --> 00:04:53,360 Speaker 1: dollar and the euro. And right now I'm looking at 81 00:04:53,400 --> 00:04:56,280 Speaker 1: a story that Bloomberg News put out showing that emerging 82 00:04:56,360 --> 00:04:59,880 Speaker 1: market companies and governments have borrowed a record amount of 83 00:05:00,040 --> 00:05:03,920 Speaker 1: hard currency debt in the past decade. What is your 84 00:05:04,000 --> 00:05:07,040 Speaker 1: view for the dollar in the next six months and 85 00:05:07,760 --> 00:05:11,680 Speaker 1: how concerning is this free m Now? The thing is 86 00:05:11,680 --> 00:05:14,200 Speaker 1: that there's not nothing new that that there had been 87 00:05:14,279 --> 00:05:16,880 Speaker 1: a hard currency in flow into a merchant market. The 88 00:05:17,000 --> 00:05:21,120 Speaker 1: fo to think about that in the context of capital 89 00:05:21,480 --> 00:05:24,120 Speaker 1: or capex expansion or in a merchant markets. When the 90 00:05:24,120 --> 00:05:27,840 Speaker 1: global economy is synchronized and strong, you eat into global 91 00:05:27,880 --> 00:05:31,000 Speaker 1: capacity reserves. You wanted to increase your capacity use your 92 00:05:31,000 --> 00:05:34,480 Speaker 1: as dollar for funding purposes, and therefore you raise dollar 93 00:05:34,600 --> 00:05:39,560 Speaker 1: debt and take it for your domestic investment purposes. So 94 00:05:39,680 --> 00:05:44,040 Speaker 1: that is not new, that is usual. Now. What is, however, 95 00:05:45,320 --> 00:05:48,120 Speaker 1: a new theme here is where do we stand in 96 00:05:48,240 --> 00:05:51,599 Speaker 1: respect of global economic growth? This is still as strong 97 00:05:51,720 --> 00:05:54,560 Speaker 1: as it's synchronized as it seemed to look in Genuary. 98 00:05:54,920 --> 00:05:57,960 Speaker 1: And we have seen all the week data, especially in 99 00:05:58,040 --> 00:06:00,160 Speaker 1: February coming in in Europe and then nature on a 100 00:06:00,240 --> 00:06:03,160 Speaker 1: well in Japan, which are raising doubts on that, and 101 00:06:03,800 --> 00:06:06,599 Speaker 1: you need to analyze the market from that point. We 102 00:06:06,680 --> 00:06:10,440 Speaker 1: have released a scoreboard here at morns than in respect 103 00:06:10,440 --> 00:06:14,359 Speaker 1: of serious dollar, which gives us quite precise information about 104 00:06:14,400 --> 00:06:17,800 Speaker 1: the outlook of serious dollar, and that want us in 105 00:06:17,880 --> 00:06:21,080 Speaker 1: February March to get long dollars. And what it does 106 00:06:21,160 --> 00:06:25,520 Speaker 1: tell me now is that it is now time to 107 00:06:26,200 --> 00:06:29,320 Speaker 1: see only very limited upside potential in zeals solar. What 108 00:06:29,360 --> 00:06:31,240 Speaker 1: I wanted to say here is that this dollar really 109 00:06:31,760 --> 00:06:34,080 Speaker 1: is going to run out of steam within the next 110 00:06:34,279 --> 00:06:37,039 Speaker 1: few weeks. Hands red, it's always great to cant shop 111 00:06:37,080 --> 00:06:39,279 Speaker 1: with your hands Jo wanting us from the capital of 112 00:06:39,400 --> 00:06:43,200 Speaker 1: Global Foreign Exchange and in London, Morgan Stanley's Investment Management 113 00:06:43,200 --> 00:07:01,479 Speaker 1: Global head of Ethics Strategy. But it's some news overnight 114 00:07:01,880 --> 00:07:05,440 Speaker 1: the United States House approving a sweeping overhaul of bank regulation, 115 00:07:05,920 --> 00:07:08,520 Speaker 1: now sending it to the President of the United States 116 00:07:08,560 --> 00:07:10,400 Speaker 1: don A. Trump, a bill that would give him a 117 00:07:10,480 --> 00:07:12,360 Speaker 1: chance to make good on his vow to do a 118 00:07:12,400 --> 00:07:14,760 Speaker 1: big number on the Dodd Frankak. So to what extent 119 00:07:14,840 --> 00:07:17,480 Speaker 1: is this a big number on the Dodd Frankack. Let's 120 00:07:17,480 --> 00:07:20,320 Speaker 1: bring an Isaac Boltanski. Shall we compass Point Research Policy 121 00:07:20,360 --> 00:07:24,440 Speaker 1: Research managing Director, Isaac your thoughts on whether this is 122 00:07:24,480 --> 00:07:28,200 Speaker 1: a big number on the regulation or not and what's 123 00:07:28,240 --> 00:07:32,080 Speaker 1: in the bill. It's a number, but I don't think 124 00:07:32,160 --> 00:07:35,400 Speaker 1: it's a big number by any means. This is a modest, 125 00:07:35,880 --> 00:07:40,080 Speaker 1: narrowly tailored bill that isn't as good as its proponents 126 00:07:40,240 --> 00:07:44,840 Speaker 1: argue or as bad as its detractors suggest. At its core, 127 00:07:44,960 --> 00:07:50,560 Speaker 1: they're really three elements. The bill significantly lessens the regulatory 128 00:07:50,600 --> 00:07:54,000 Speaker 1: burden for community banks, and here I mean banks under 129 00:07:54,080 --> 00:07:58,880 Speaker 1: ten billion and assets. It modestly reduced compliance costs for 130 00:07:59,000 --> 00:08:03,240 Speaker 1: regional banks, uh. And the mechanism that does there is 131 00:08:03,360 --> 00:08:08,840 Speaker 1: raising the fifty billion threshold for enhanced stand prudential standards 132 00:08:08,840 --> 00:08:11,280 Speaker 1: from the FED all the way up to two and 133 00:08:11,360 --> 00:08:15,000 Speaker 1: fifty billion over time. And I think it's gonna bolster 134 00:08:15,560 --> 00:08:18,760 Speaker 1: m and atail winds in the banking sector as a result. Well, 135 00:08:18,880 --> 00:08:20,080 Speaker 1: and that's where I was going to go with this. 136 00:08:20,440 --> 00:08:23,120 Speaker 1: I think after reading a number of nacs last night 137 00:08:23,520 --> 00:08:26,880 Speaker 1: after this bill was passed, it seems like there is 138 00:08:26,920 --> 00:08:29,440 Speaker 1: going to be a pretty significant wave of mergers and 139 00:08:29,480 --> 00:08:33,680 Speaker 1: acquisitions among smaller community banks, and that may be the 140 00:08:33,880 --> 00:08:38,600 Speaker 1: biggest takeaway from this number. To use the language de jure, 141 00:08:38,720 --> 00:08:40,640 Speaker 1: I'm just wondering, I mean, do you think that this 142 00:08:40,679 --> 00:08:42,960 Speaker 1: is going to benefit that industry or do you think, 143 00:08:43,000 --> 00:08:45,440 Speaker 1: I mean, what's what's the outcome the ultimate outcome of that. 144 00:08:46,840 --> 00:08:49,280 Speaker 1: The ultimate outcome, I think is that we will have 145 00:08:50,440 --> 00:08:54,679 Speaker 1: a modest consolidation the banking sector. I think that regional 146 00:08:54,720 --> 00:08:58,080 Speaker 1: banks and super regional banks will become a choirers. I 147 00:08:58,120 --> 00:09:01,800 Speaker 1: think that they will um start looking around the landscape 148 00:09:01,840 --> 00:09:05,480 Speaker 1: more aggressively. A good example is New York Community Bank, 149 00:09:05,640 --> 00:09:10,120 Speaker 1: who sits at point seven billion in assets and has 150 00:09:10,160 --> 00:09:13,959 Speaker 1: done everything food to stay under that fifty billion threshold. 151 00:09:14,760 --> 00:09:17,920 Speaker 1: Now they have the capacity to local across the landscape 152 00:09:17,960 --> 00:09:21,160 Speaker 1: and see where they want to increase their footprint. And 153 00:09:21,200 --> 00:09:23,200 Speaker 1: so I think that's a perfect example of someone who 154 00:09:23,240 --> 00:09:26,160 Speaker 1: wasn't a buyer is going to become a buyer after 155 00:09:26,200 --> 00:09:29,319 Speaker 1: the President sells this sells the ex cuse science this 156 00:09:29,520 --> 00:09:32,600 Speaker 1: bill on Thursday, Isaac Toun to what extent is there 157 00:09:32,640 --> 00:09:35,920 Speaker 1: any evidence that banks have struggled to lend because of 158 00:09:35,960 --> 00:09:40,760 Speaker 1: these regulations? It's a it's a tough argument to prove, 159 00:09:40,880 --> 00:09:44,400 Speaker 1: and I think of the mortgage market is a good example. 160 00:09:45,000 --> 00:09:50,480 Speaker 1: Um is there are mortgage credit standards too tight? Or 161 00:09:50,600 --> 00:09:56,160 Speaker 1: is it an issue of household formation and supply availability 162 00:09:56,640 --> 00:09:59,840 Speaker 1: and inventory in certain markets. So I think we hear 163 00:10:00,000 --> 00:10:03,840 Speaker 1: lot of hyperbolic arguments, especially about this bill, but as 164 00:10:03,880 --> 00:10:06,480 Speaker 1: you know, the truth is always more nuanced when it 165 00:10:06,520 --> 00:10:10,720 Speaker 1: comes to financial services policy in particular. So I think 166 00:10:10,720 --> 00:10:13,360 Speaker 1: that on the margin, we are going to see a 167 00:10:13,559 --> 00:10:16,680 Speaker 1: slight increase in lending in certain products because of this bill, 168 00:10:16,880 --> 00:10:20,120 Speaker 1: and community banks are going to become a more willing 169 00:10:20,120 --> 00:10:24,199 Speaker 1: to lend, particularly in mortgage products. But it's not going 170 00:10:24,280 --> 00:10:29,440 Speaker 1: to be the panacea or lending activity that some have 171 00:10:29,480 --> 00:10:32,480 Speaker 1: described it as. Isaac, do you think that big Wall 172 00:10:32,480 --> 00:10:35,880 Speaker 1: Street banks are going to take more risk, substantially more 173 00:10:36,000 --> 00:10:41,800 Speaker 1: risk under the sort of rolled back good Frank so 174 00:10:42,760 --> 00:10:46,520 Speaker 1: from this bill. No, there's very little in this bill 175 00:10:46,600 --> 00:10:51,520 Speaker 1: that impacts the biggest Wall Street banks. It's supplementary leverage 176 00:10:51,640 --> 00:10:56,679 Speaker 1: ratio change and immiscible bond capital change, um. But if 177 00:10:56,720 --> 00:10:59,720 Speaker 1: we look more holistically and we start to think about 178 00:11:00,400 --> 00:11:04,320 Speaker 1: forthcoming issues, in particular the vulgar rule change that's going 179 00:11:04,360 --> 00:11:07,839 Speaker 1: to be ongoing throughout the year from the five regulators, 180 00:11:08,200 --> 00:11:11,000 Speaker 1: as well as some of the other capital and liquidity 181 00:11:11,080 --> 00:11:14,640 Speaker 1: role changes ahead, I do think that it's clear directionally 182 00:11:14,960 --> 00:11:18,160 Speaker 1: the regulatory burden is lstening for those bigger banks. Isaac's 183 00:11:18,160 --> 00:11:20,480 Speaker 1: always great to get your insight on what's happening in Washington, 184 00:11:20,520 --> 00:11:22,640 Speaker 1: d C. And ultimately what it means for some of 185 00:11:22,679 --> 00:11:26,120 Speaker 1: the themes and stories happening here on Wall Street. Issa Boltanski, 186 00:11:26,160 --> 00:11:42,040 Speaker 1: Campus Point Research Policy, a research managing director. I've been 187 00:11:42,040 --> 00:11:44,400 Speaker 1: talking a lot about developing markets this morning as the 188 00:11:44,440 --> 00:11:48,600 Speaker 1: Turkish lira falls in a precipitous decline that seems to 189 00:11:48,600 --> 00:11:51,560 Speaker 1: have no end. So with us, please to say Don Gimble, 190 00:11:51,600 --> 00:11:56,400 Speaker 1: Senior vice president of c IBC Atlantic Trust Wealth Management, 191 00:11:56,480 --> 00:12:00,240 Speaker 1: overseeing forty eight billion dollars. He has decade it's of 192 00:12:00,240 --> 00:12:03,000 Speaker 1: experience in the market, and we are pleased to say 193 00:12:03,040 --> 00:12:05,160 Speaker 1: he joins us here, Don um, I want to just 194 00:12:05,200 --> 00:12:08,200 Speaker 1: get your view on developing markets. You said that about 195 00:12:08,240 --> 00:12:11,360 Speaker 1: half your fund is currently in the US, quarter in 196 00:12:11,440 --> 00:12:14,520 Speaker 1: Asia and a quarter in Europe. Correct. So, right now, 197 00:12:14,760 --> 00:12:19,480 Speaker 1: at a time when particularly China has built up it's 198 00:12:19,559 --> 00:12:22,760 Speaker 1: external debt to such a degree and has overleveraged its 199 00:12:22,760 --> 00:12:25,880 Speaker 1: economy to the point where they're actually taking action, are 200 00:12:25,880 --> 00:12:30,040 Speaker 1: you getting more concerned now? Interesting? We've been talking about 201 00:12:30,240 --> 00:12:34,280 Speaker 1: the excess of US treasury debt for how many decades, 202 00:12:34,720 --> 00:12:38,240 Speaker 1: and now we're talking about China. And I remember a 203 00:12:38,240 --> 00:12:43,559 Speaker 1: few years ago talking about was there a banking crisis 204 00:12:43,800 --> 00:12:47,280 Speaker 1: in China? And I had several clients saying, Oh my god, 205 00:12:47,320 --> 00:12:48,840 Speaker 1: We've got to get out of China because of the 206 00:12:48,840 --> 00:12:51,720 Speaker 1: banking situation. And I said, the banks are owned by 207 00:12:51,720 --> 00:12:56,199 Speaker 1: the government, They're not going to default. And I look 208 00:12:56,240 --> 00:13:01,000 Speaker 1: at China today now they in my opinion, the the 209 00:13:01,080 --> 00:13:03,920 Speaker 1: miracle of the People's Republic of China for the last 210 00:13:03,960 --> 00:13:07,840 Speaker 1: twenty years has been the financing by the United States 211 00:13:07,920 --> 00:13:11,080 Speaker 1: of the growth in China. There's been a huge transfer 212 00:13:11,520 --> 00:13:15,680 Speaker 1: of money into into China over the last twenty years, 213 00:13:16,160 --> 00:13:20,960 Speaker 1: and that has produced what we've seen. And Uh, is 214 00:13:20,960 --> 00:13:23,559 Speaker 1: it coming to an end now? Well, I think that 215 00:13:23,679 --> 00:13:26,640 Speaker 1: the question you're gonna ask the right question. You know, 216 00:13:27,160 --> 00:13:30,760 Speaker 1: if you ask the run question, the right the right 217 00:13:30,840 --> 00:13:36,920 Speaker 1: question is in China, we've seen a consolidation of power 218 00:13:38,280 --> 00:13:44,040 Speaker 1: from a standing committee into the hands of the leader. Uh. Now, 219 00:13:44,280 --> 00:13:48,800 Speaker 1: in in when Singapore was started fifty years ago, Li Kwang, you, 220 00:13:49,120 --> 00:13:54,200 Speaker 1: an enlightened man of incredible strength, formed a country and 221 00:13:54,280 --> 00:13:57,040 Speaker 1: ran a country and has run a country for well. 222 00:13:57,040 --> 00:14:00,000 Speaker 1: He passed away last year, as you know, but uh 223 00:14:00,120 --> 00:14:02,839 Speaker 1: for fifty years and he did wonderful things made made 224 00:14:03,440 --> 00:14:07,199 Speaker 1: Singapore into the jewel in the crown of Asia. Uh. 225 00:14:07,240 --> 00:14:11,119 Speaker 1: In China, we have a consolidation, And the question is 226 00:14:11,120 --> 00:14:15,120 Speaker 1: is this an enlightened man who is opening his arms 227 00:14:15,520 --> 00:14:19,120 Speaker 1: to h two foreigners and is continuing to raise the 228 00:14:19,160 --> 00:14:22,000 Speaker 1: standard of living in the in the People's Republic. Uh? 229 00:14:22,080 --> 00:14:26,280 Speaker 1: So far the answer is yes. But Uh, the the 230 00:14:26,320 --> 00:14:30,480 Speaker 1: extent of landing in China, I think really is not 231 00:14:31,040 --> 00:14:34,520 Speaker 1: that relevant to the future of the PRC at this point. 232 00:14:34,760 --> 00:14:37,600 Speaker 1: Now could it get worse? Of course? So you know 233 00:14:37,640 --> 00:14:42,560 Speaker 1: you're talking about how you decide when to change your investments. Uh. 234 00:14:42,600 --> 00:14:47,160 Speaker 1: If the fundamentals change, and a lot of people are 235 00:14:47,240 --> 00:14:50,400 Speaker 1: saying the fundamentals are shifting, that we're not seeing the 236 00:14:50,440 --> 00:14:53,520 Speaker 1: sort of synchronized global growth that we once did. Uh 237 00:14:53,600 --> 00:14:56,080 Speaker 1: you're rolling your eyes. Um that that that you know, 238 00:14:56,160 --> 00:14:58,760 Speaker 1: you're seeing weakness, You're seeing defaults take up in China, 239 00:14:58,840 --> 00:15:02,520 Speaker 1: You're seeing the situation in Argentina and Turkey interiorate. Is 240 00:15:02,560 --> 00:15:07,280 Speaker 1: that not a fundamental change to you? Uh, it's an evolution. Uh. 241 00:15:07,840 --> 00:15:11,040 Speaker 1: As somebody said a couple of days ago on Bloomberg, Uh, 242 00:15:11,160 --> 00:15:15,080 Speaker 1: we're not in the early stages of this economic cycle. Globally, 243 00:15:16,200 --> 00:15:20,000 Speaker 1: the question is are we at in the fourth inning, 244 00:15:20,080 --> 00:15:23,000 Speaker 1: the sixth inning or the eighth inning? UM? And I 245 00:15:23,040 --> 00:15:26,040 Speaker 1: think that's that's a really good question. My guesses were 246 00:15:26,040 --> 00:15:29,720 Speaker 1: halfway through the game. UM. And there's there's at least 247 00:15:30,440 --> 00:15:34,680 Speaker 1: a couple of years left UM in much of the world. Now, 248 00:15:35,080 --> 00:15:38,960 Speaker 1: what's happening in Turkey is government driven. And when a 249 00:15:39,000 --> 00:15:43,360 Speaker 1: government drives off a cliff, as in my opinion, as 250 00:15:43,360 --> 00:15:47,480 Speaker 1: it has in Turkey, and as as the deterioration in 251 00:15:47,560 --> 00:15:51,640 Speaker 1: both Argentina and to a lesser degree in Brazil, UM 252 00:15:52,480 --> 00:15:56,040 Speaker 1: are our red flags, There's no doubt. But that isn't 253 00:15:56,240 --> 00:15:59,840 Speaker 1: That isn't necessarily the whole picture of the emerging markets. 254 00:16:00,080 --> 00:16:05,600 Speaker 1: Emerging markets are a vast number of very individual countries 255 00:16:05,960 --> 00:16:10,400 Speaker 1: whose economic growth is well behind their development as well 256 00:16:10,440 --> 00:16:14,400 Speaker 1: behind ours. Therefore we call them developing countries. We you know, 257 00:16:14,480 --> 00:16:16,600 Speaker 1: we used to call them third world. We can't do 258 00:16:16,640 --> 00:16:20,640 Speaker 1: that anymore, right, So it's UM. But you know, I 259 00:16:20,640 --> 00:16:23,680 Speaker 1: I look at problems around the world and there's wall 260 00:16:23,720 --> 00:16:26,920 Speaker 1: that we were talking about before, the wall of worry. 261 00:16:26,920 --> 00:16:30,480 Speaker 1: We have it in in the UK with Brexas, Um, 262 00:16:30,560 --> 00:16:32,880 Speaker 1: we have it with a new young man in France, 263 00:16:33,320 --> 00:16:37,080 Speaker 1: so we have struggling in Spain. I mean they're all 264 00:16:37,120 --> 00:16:39,800 Speaker 1: over the world. Look at look at what's happening in Australia. 265 00:16:39,920 --> 00:16:42,160 Speaker 1: So we could talk for hours on we could, but 266 00:16:42,320 --> 00:16:44,400 Speaker 1: times run out. Don Can I just say thank you, 267 00:16:44,480 --> 00:16:46,320 Speaker 1: thank for coming in this morning. We really appreciate your 268 00:16:46,320 --> 00:16:49,880 Speaker 1: balanced approach to two global markets, a reasoned approach at 269 00:16:49,880 --> 00:16:51,720 Speaker 1: a time when there's a lot of scary news out 270 00:16:51,760 --> 00:16:54,640 Speaker 1: there in some places, including Turkey. Don Gimball, Senior vice 271 00:16:54,680 --> 00:16:57,640 Speaker 1: president of c I p C Atlantic Trust Wealth Management, 272 00:17:11,400 --> 00:17:14,600 Speaker 1: and a lot of news this morning, and among the headlines, 273 00:17:14,680 --> 00:17:19,560 Speaker 1: Comcast decided to up the antie for the Fox assets 274 00:17:19,600 --> 00:17:22,440 Speaker 1: and is going to offer a cash bid that will 275 00:17:22,480 --> 00:17:26,440 Speaker 1: likely exceed the one of Walt Disney and Co. Walt 276 00:17:26,440 --> 00:17:31,320 Speaker 1: Disney shares down nearly nine tenths of one percent, so 277 00:17:31,560 --> 00:17:34,000 Speaker 1: definitely a strong reaction. I want to bring in Abilla Ahmed, 278 00:17:34,200 --> 00:17:36,800 Speaker 1: who's been covering the twists and turns in the saga, 279 00:17:36,880 --> 00:17:38,880 Speaker 1: and I'm sure that there will be more of them 280 00:17:38,920 --> 00:17:42,560 Speaker 1: as it continues. For Bloomberg News. She covers all things 281 00:17:42,600 --> 00:17:45,679 Speaker 1: deals and Disney and everything else. Uh so, what do 282 00:17:45,720 --> 00:17:47,400 Speaker 1: we make of this? Right? I mean, this seems like 283 00:17:48,000 --> 00:17:50,879 Speaker 1: the Fox the Fox assets at hand. Here we're talking 284 00:17:50,920 --> 00:17:53,679 Speaker 1: about the movies, we're talking about the TV shows, we're 285 00:17:53,720 --> 00:17:57,680 Speaker 1: talking about content. Why does Comcast want that more than Disney? 286 00:17:58,440 --> 00:18:01,240 Speaker 1: Comcast neids in more than Disney's. People will say, Disney 287 00:18:01,280 --> 00:18:06,040 Speaker 1: obviously has its own TV film studio. Comcast doesn't. Comcast product, 288 00:18:06,240 --> 00:18:08,639 Speaker 1: especially overseas when you look at it is significantly weaker 289 00:18:08,680 --> 00:18:11,720 Speaker 1: than Disney. So Comcast is pretty desperate. You know. I 290 00:18:11,720 --> 00:18:13,679 Speaker 1: think everybody's woken up to the fact that this is 291 00:18:13,680 --> 00:18:17,080 Speaker 1: the last big asset of scale to go in the 292 00:18:17,119 --> 00:18:20,399 Speaker 1: media industry, and everyone's just falling over themselves to secure it. 293 00:18:20,680 --> 00:18:22,239 Speaker 1: Where they're going to get the money to make this 294 00:18:22,280 --> 00:18:27,480 Speaker 1: deal happen the debt markets. We already have sixty six 295 00:18:27,520 --> 00:18:29,719 Speaker 1: billion dollars of debt. This is going to make them 296 00:18:29,760 --> 00:18:33,760 Speaker 1: one of the most indebted American companies. And you know, 297 00:18:33,960 --> 00:18:37,800 Speaker 1: there are debt investors who having already indicated they're happy 298 00:18:37,840 --> 00:18:40,679 Speaker 1: to lend to this company. You know, most of the 299 00:18:40,680 --> 00:18:43,040 Speaker 1: debt issuance in the market has been to do with 300 00:18:43,200 --> 00:18:45,040 Speaker 1: M and A, and this is just another deal, and 301 00:18:45,520 --> 00:18:48,119 Speaker 1: you know people are happy to support it. Well, some 302 00:18:48,160 --> 00:18:49,920 Speaker 1: people who are a little bit less than happy or 303 00:18:49,960 --> 00:18:54,240 Speaker 1: the Comcast shareholders shares down now in futures trading down 304 00:18:54,280 --> 00:18:57,760 Speaker 1: more than two in responses and just to say down 305 00:18:57,960 --> 00:19:03,400 Speaker 1: more than twenty five, and since they January minor detail. 306 00:19:03,480 --> 00:19:05,359 Speaker 1: I mean, it seems like people are not that enthused 307 00:19:05,359 --> 00:19:08,120 Speaker 1: about this bidding war. Is it just the price or 308 00:19:08,560 --> 00:19:10,600 Speaker 1: is it that people think that there just isn't necessarily 309 00:19:10,920 --> 00:19:13,480 Speaker 1: a better strategy here other than entering into this kind 310 00:19:13,480 --> 00:19:15,439 Speaker 1: of a bit of both. And I think Comcast holders 311 00:19:15,480 --> 00:19:17,639 Speaker 1: think that this is a vote against what Comcast is 312 00:19:17,640 --> 00:19:20,160 Speaker 1: currently doing, which is cable and that makes up eight 313 00:19:20,600 --> 00:19:23,280 Speaker 1: of their business currently. So people are saying, hey, if 314 00:19:23,320 --> 00:19:26,480 Speaker 1: you think it's like we should be just betting the 315 00:19:26,520 --> 00:19:28,520 Speaker 1: house and going for these assets, what does it say 316 00:19:28,520 --> 00:19:32,040 Speaker 1: about what we actually currently do? Well, you know, just 317 00:19:32,080 --> 00:19:34,840 Speaker 1: to go back to Lisa's point about how shareholders are 318 00:19:34,880 --> 00:19:38,120 Speaker 1: seemed to be so thrilled about this um. If you 319 00:19:38,280 --> 00:19:42,320 Speaker 1: were going to offer a combination stock cash deal, that 320 00:19:43,000 --> 00:19:45,800 Speaker 1: seems to have been taken away not necessarily by your 321 00:19:45,840 --> 00:19:49,199 Speaker 1: own internal strategy, but by the marketplace. Because if you're 322 00:19:49,200 --> 00:19:52,639 Speaker 1: going to be offering anything that involves Comcast stock, you 323 00:19:52,680 --> 00:19:58,080 Speaker 1: could bet that that would be a much less valuable deal. Yeah, 324 00:19:58,119 --> 00:20:00,840 Speaker 1: and listen, Fox is already said that they are not 325 00:20:00,960 --> 00:20:03,960 Speaker 1: interested in that, right, But remember Comcast actually made a 326 00:20:03,960 --> 00:20:06,920 Speaker 1: bit for these assets late last year, and Fox chose 327 00:20:06,920 --> 00:20:10,560 Speaker 1: Disney over Comcast at that time, Right, So what does 328 00:20:10,680 --> 00:20:13,600 Speaker 1: what I mean? How much more would they have to offer? Well, 329 00:20:13,640 --> 00:20:16,440 Speaker 1: at that time, they had offered sixteen percent more than 330 00:20:16,600 --> 00:20:19,359 Speaker 1: what foxes agree to sell these assets to Disney for, 331 00:20:19,720 --> 00:20:22,200 Speaker 1: So that would put it out about sixty billion dollars. 332 00:20:22,400 --> 00:20:25,160 Speaker 1: Talking to my sources today, they are saying that they 333 00:20:25,200 --> 00:20:27,760 Speaker 1: do realize that it's going to have to be higher 334 00:20:27,800 --> 00:20:32,840 Speaker 1: than that to beat out Disney. Alright, So here's the thing. 335 00:20:33,000 --> 00:20:37,159 Speaker 1: From Fox's perspective, does it matter Are they just interested 336 00:20:37,160 --> 00:20:39,760 Speaker 1: in a price tag or is there something more here 337 00:20:39,800 --> 00:20:43,560 Speaker 1: that they're looking for in a suitor if you're just 338 00:20:43,640 --> 00:20:46,919 Speaker 1: their pocketbook, or they're looking beyond the wallet and just 339 00:20:46,960 --> 00:20:52,840 Speaker 1: looking at the personality. Sure, Initially Rupert Murdoch was not 340 00:20:53,040 --> 00:20:55,320 Speaker 1: just about the wallet, but what he wanted. He's going 341 00:20:55,359 --> 00:20:58,520 Speaker 1: to have five percent share in the new Disney with 342 00:20:58,560 --> 00:21:01,520 Speaker 1: the Fox assets combined, and that would have mitigated a 343 00:21:01,520 --> 00:21:04,160 Speaker 1: lot of tax issues for him. So in all, cash 344 00:21:04,359 --> 00:21:08,879 Speaker 1: bid for him makes less sense because because of because 345 00:21:08,880 --> 00:21:11,200 Speaker 1: of the tax and the tax burden that the family 346 00:21:11,200 --> 00:21:13,240 Speaker 1: will have to bear. So Comcast has to keep that 347 00:21:13,280 --> 00:21:16,119 Speaker 1: in mind when it's coming back with its second firm offer. 348 00:21:16,240 --> 00:21:18,880 Speaker 1: But this is really interesting. In other words, even if 349 00:21:18,960 --> 00:21:23,680 Speaker 1: Comcast gives a higher offer than Disney, it might be 350 00:21:23,960 --> 00:21:27,399 Speaker 1: less attractive to the Murdoch's as a result of the 351 00:21:27,480 --> 00:21:30,159 Speaker 1: tax treatment. Yeah. Absolutely, and that was one of the 352 00:21:30,200 --> 00:21:32,920 Speaker 1: reasons why they said they didn't go for Comcast offer 353 00:21:33,400 --> 00:21:35,560 Speaker 1: late last year, even though at that time it was 354 00:21:35,600 --> 00:21:39,359 Speaker 1: already higher. And they were also worried about regulatory the 355 00:21:39,440 --> 00:21:43,520 Speaker 1: regulatory issues. As you know, regulators have been very strongly 356 00:21:43,560 --> 00:21:46,720 Speaker 1: looking at all of these sorts of mergers and and 357 00:21:47,000 --> 00:21:49,360 Speaker 1: you know, Fox decided that they thought that the Disney 358 00:21:49,359 --> 00:21:53,960 Speaker 1: bid had a better chance of getting through. Well, the 359 00:21:54,000 --> 00:21:57,760 Speaker 1: regulators in the UK, I believe they were very concerned 360 00:21:57,800 --> 00:22:01,000 Speaker 1: about what would happen to Sky News. Yeah, and look, 361 00:22:01,280 --> 00:22:04,119 Speaker 1: and that's another there's already a bit more there for 362 00:22:04,160 --> 00:22:06,719 Speaker 1: Sky as well. You know, as you know, Fox has 363 00:22:06,720 --> 00:22:09,280 Speaker 1: been trying to buy that business for a while, um 364 00:22:10,200 --> 00:22:12,879 Speaker 1: of it it doesn't already own, and Comcast is come 365 00:22:12,920 --> 00:22:15,320 Speaker 1: in and made a bit for that too. All right, Well, 366 00:22:15,320 --> 00:22:17,639 Speaker 1: the saga continues and We will keep following it, and 367 00:22:17,840 --> 00:22:19,720 Speaker 1: so will you, and you'll be joining us, I'm sure 368 00:22:19,760 --> 00:22:23,320 Speaker 1: again in the near future. Nobela Ahmed, Bloomberg Deal's reporter 369 00:22:23,560 --> 00:22:27,840 Speaker 1: and the expert. When it comes to Comcast and Fox 370 00:22:27,880 --> 00:22:31,520 Speaker 1: and Disney, maybe they'll make it into a into a 371 00:22:31,560 --> 00:22:36,200 Speaker 1: you know, a Netflix series that could run simultaneous series 372 00:22:36,560 --> 00:22:49,240 Speaker 1: about CPS. And indeed, indeed, thanks for listening to the 373 00:22:49,240 --> 00:22:55,760 Speaker 1: Bloomberg Surveillance Podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, 374 00:22:56,119 --> 00:23:00,160 Speaker 1: or whichever podcast platform you prefer. I'm on Twitter her 375 00:23:00,200 --> 00:23:03,639 Speaker 1: at Tom Keene before the podcast. You can always catch 376 00:23:03,720 --> 00:23:06,160 Speaker 1: us worldwide. I'm Bloomberg Radio.