1 00:00:09,880 --> 00:00:13,840 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jearlie. 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 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,920 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg So 5 00:00:28,000 --> 00:00:29,880 Speaker 1: waiting on the data on please to say joining us 6 00:00:29,880 --> 00:00:31,400 Speaker 1: here in New York, we can say good morning to 7 00:00:31,480 --> 00:00:34,920 Speaker 1: David Paige, Acts for investment Managers, senior economists, good money 8 00:00:34,920 --> 00:00:37,160 Speaker 1: to day morning. Let's talk about their data a little 9 00:00:37,159 --> 00:00:39,559 Speaker 1: bit later this morning in America. What are you looking for? So? 10 00:00:39,640 --> 00:00:41,000 Speaker 1: I think what we're seeing, and we've seen it in 11 00:00:41,000 --> 00:00:43,360 Speaker 1: the European numbers, is that we're in a global manufacturing 12 00:00:43,360 --> 00:00:45,879 Speaker 1: slowdown here UM. And that's something that we've seen very 13 00:00:45,880 --> 00:00:47,920 Speaker 1: clearly in the U S data as well. What's not 14 00:00:47,960 --> 00:00:50,040 Speaker 1: obvious is how much that's spilling forward. So in terms 15 00:00:50,040 --> 00:00:52,080 Speaker 1: of the I M today we see another soft picture, 16 00:00:52,120 --> 00:00:54,960 Speaker 1: you know, mixed numbers that coming out of the regional numbers. 17 00:00:55,000 --> 00:00:59,120 Speaker 1: Even yesterday Chicago was pretty soft, Dallas not so much so. UM. 18 00:00:59,120 --> 00:01:01,200 Speaker 1: And from a European spective, I think, you know, very 19 00:01:01,320 --> 00:01:04,040 Speaker 1: very early suggestions that maybe we've seen something of a 20 00:01:04,200 --> 00:01:06,679 Speaker 1: bottom come through here. But I think you know we're 21 00:01:06,720 --> 00:01:08,600 Speaker 1: in the broad scheme of things. The IM is gonna 22 00:01:08,600 --> 00:01:10,319 Speaker 1: remain soft, and it's how much it spills into the 23 00:01:10,319 --> 00:01:13,080 Speaker 1: non manufacturing on on Thursday that's going to be key. 24 00:01:13,160 --> 00:01:15,199 Speaker 1: What do you see beneath the surface of some really 25 00:01:15,520 --> 00:01:18,760 Speaker 1: awful headline numbers that give you some encouragement that the 26 00:01:18,800 --> 00:01:21,080 Speaker 1: story might be bottoming out. What do you see A 27 00:01:21,120 --> 00:01:24,280 Speaker 1: couple of things. I mean that the China numbers this weekend, 28 00:01:24,760 --> 00:01:26,680 Speaker 1: this the last couple of days was not too bad. 29 00:01:26,760 --> 00:01:29,160 Speaker 1: We started to see some pickup come through there. Also 30 00:01:29,200 --> 00:01:32,520 Speaker 1: the European p M eyes, although they've fallen back there 31 00:01:32,520 --> 00:01:34,639 Speaker 1: at odds with some of the some of the more 32 00:01:34,680 --> 00:01:37,640 Speaker 1: country based measures, particularly in France for example. So we 33 00:01:37,720 --> 00:01:40,920 Speaker 1: think that given the China moves there maybe some traction 34 00:01:40,959 --> 00:01:43,080 Speaker 1: coming through from the stimulus that we've seen. The problem, 35 00:01:43,080 --> 00:01:45,080 Speaker 1: of course, is going to be the additional headwinds that 36 00:01:45,080 --> 00:01:46,959 Speaker 1: we see come through in the fourth quarter. We are 37 00:01:47,000 --> 00:01:49,880 Speaker 1: expecting trade to be an issue again, probably as soon 38 00:01:49,960 --> 00:01:52,560 Speaker 1: as the next couple of weeks. David, what's the statistic 39 00:01:52,680 --> 00:01:55,400 Speaker 1: actually has in the US economy is a two percent? 40 00:01:55,560 --> 00:01:58,200 Speaker 1: Is that we're optimistic two point three, or do you 41 00:01:58,320 --> 00:02:00,480 Speaker 1: bring it on down with all these chair lenges to 42 00:02:00,640 --> 00:02:04,160 Speaker 1: something so that this twelve months forward. So for this 43 00:02:04,240 --> 00:02:06,560 Speaker 1: year we've got two point three percent. Next year we've 44 00:02:06,600 --> 00:02:08,880 Speaker 1: got one point six, so we think it slows. And 45 00:02:08,880 --> 00:02:10,640 Speaker 1: we've got Q three g d P come in in 46 00:02:10,680 --> 00:02:13,600 Speaker 1: a two percent annualized so we are seeing its slow down. 47 00:02:13,680 --> 00:02:15,240 Speaker 1: I mean, I look at ACTS I look at your 48 00:02:15,280 --> 00:02:18,440 Speaker 1: colleagues at PIMCO, with much the same responsibilities that ACTSA 49 00:02:18,520 --> 00:02:23,639 Speaker 1: has with longer old money. How do the politicians do 50 00:02:24,080 --> 00:02:28,560 Speaker 1: a sub two percent economy or not comfortably? Um? And 51 00:02:28,600 --> 00:02:30,200 Speaker 1: of course I think that's one of the debates that's 52 00:02:30,240 --> 00:02:31,760 Speaker 1: going on in the White House at the moment. We've 53 00:02:31,800 --> 00:02:34,160 Speaker 1: heard a lot of White House staff suggesting that they've 54 00:02:34,200 --> 00:02:37,080 Speaker 1: been urging the President to take this interim deal from 55 00:02:37,160 --> 00:02:39,800 Speaker 1: China to try and soft pedal a little bit through 56 00:02:39,880 --> 00:02:43,000 Speaker 1: here and concentrate on a solid economy, particularly going into 57 00:02:43,040 --> 00:02:45,680 Speaker 1: next year's election. Now, whether or not the president takes that, 58 00:02:45,960 --> 00:02:47,960 Speaker 1: whether or not he can take that against a backdrop 59 00:02:48,000 --> 00:02:50,519 Speaker 1: of all the domestic pressure here is a big question. John. 60 00:02:50,560 --> 00:02:53,680 Speaker 1: The chart of equities flat even a little rising in 61 00:02:53,720 --> 00:02:57,680 Speaker 1: the quarter for actually versus the Q three story which 62 00:02:57,760 --> 00:03:02,640 Speaker 1: was stunningly low yields. David really really disappointing that after 63 00:03:02,680 --> 00:03:06,000 Speaker 1: this massive effort to get China to level the playing field, 64 00:03:06,320 --> 00:03:09,960 Speaker 1: they accepted an interim deal for short term political and 65 00:03:10,000 --> 00:03:13,160 Speaker 1: economic reasons. Well, it's not clear that they're going to 66 00:03:13,240 --> 00:03:15,880 Speaker 1: have much of a choice. There is no long term 67 00:03:15,919 --> 00:03:18,520 Speaker 1: strategic deal on the table over the next over the 68 00:03:18,520 --> 00:03:21,760 Speaker 1: next three months, potentially probably not over the next twelve 69 00:03:21,760 --> 00:03:25,519 Speaker 1: months either. So what you see is a pragmatic choice 70 00:03:25,560 --> 00:03:28,120 Speaker 1: that the White House has to make. Do they persist 71 00:03:28,200 --> 00:03:30,440 Speaker 1: with tariff hikes on the fifteenth of October and the 72 00:03:30,440 --> 00:03:34,240 Speaker 1: fifteenth of December and potentially going into next year, risking 73 00:03:34,520 --> 00:03:37,680 Speaker 1: the problems of an election or not? Would it be disappointing, 74 00:03:37,800 --> 00:03:39,800 Speaker 1: certainly not from markets? If well, this would be the 75 00:03:39,840 --> 00:03:41,960 Speaker 1: big question I think that has existed over the last 76 00:03:42,000 --> 00:03:44,560 Speaker 1: two years. To what degree with the economy, to what 77 00:03:44,640 --> 00:03:48,360 Speaker 1: extent with the markets constrained this administration's ability to do 78 00:03:48,360 --> 00:03:49,960 Speaker 1: what I think a lot of people agree with, which 79 00:03:50,000 --> 00:03:52,240 Speaker 1: is getting China to open the economy up more and 80 00:03:52,280 --> 00:03:54,720 Speaker 1: getting them to level the playing field. I haven't seen 81 00:03:54,720 --> 00:03:57,000 Speaker 1: it in the markets. Financial conditions are still pretty loose, 82 00:03:57,080 --> 00:03:59,400 Speaker 1: supported of course by the Federal Reserve. We've certainly had 83 00:03:59,440 --> 00:04:01,760 Speaker 1: a lot of other hility in between now and say 84 00:04:01,800 --> 00:04:05,280 Speaker 1: eighteen months ago. In the economy, we've started to see 85 00:04:05,280 --> 00:04:07,800 Speaker 1: some weakness, but not in the labor market in a 86 00:04:07,840 --> 00:04:10,840 Speaker 1: pronounced way that I think is really unsettling this administration 87 00:04:10,920 --> 00:04:13,880 Speaker 1: just yet now that I emphasize the word yet, because 88 00:04:13,880 --> 00:04:16,000 Speaker 1: I wonder when it will start to bleed into the 89 00:04:16,080 --> 00:04:17,919 Speaker 1: labor market. Do you see any sign of that at 90 00:04:17,960 --> 00:04:20,080 Speaker 1: the moment, David, that it's bleeding through? Yes, I mean, 91 00:04:20,120 --> 00:04:22,640 Speaker 1: we're seeing a clear slowdown in the in the labor market. 92 00:04:22,720 --> 00:04:24,640 Speaker 1: Some of that's driven by manufacturing, so you know, we'll 93 00:04:24,640 --> 00:04:26,680 Speaker 1: get payrolls on Friday to confirm the trend. But the 94 00:04:26,680 --> 00:04:29,080 Speaker 1: three months trend in payrolls growth has slow to sub 95 00:04:29,120 --> 00:04:32,560 Speaker 1: one fifty, whereas last year, albeit boosted by this le stimulus, 96 00:04:32,600 --> 00:04:34,880 Speaker 1: it was over two hundreds. We are seeing a softening, 97 00:04:35,000 --> 00:04:39,560 Speaker 1: but that's brilliant. How do you model sub two GDP 98 00:04:39,720 --> 00:04:43,440 Speaker 1: and that a hundred thousand nine farm imperials? Are we 99 00:04:43,480 --> 00:04:46,600 Speaker 1: going to enjoy d run rate? Now? And I think 100 00:04:46,600 --> 00:04:48,359 Speaker 1: the risk is and I think we're close to a 101 00:04:48,440 --> 00:04:50,800 Speaker 1: tipping point here, and that's one of the key concerns 102 00:04:50,800 --> 00:04:53,080 Speaker 1: if we see the economy dip much below one and 103 00:04:53,120 --> 00:04:55,400 Speaker 1: a half percent, then you would expect to see on 104 00:04:55,839 --> 00:04:58,640 Speaker 1: the employment rate slow so that unemployment starts to pick up, 105 00:04:58,720 --> 00:05:01,320 Speaker 1: and that's not sustainable. The FED would have to work 106 00:05:02,520 --> 00:05:04,720 Speaker 1: rate just to jump in. David, what's the equilibrium rate? 107 00:05:04,760 --> 00:05:06,719 Speaker 1: That the amount of payrolls we need to be generating 108 00:05:06,839 --> 00:05:08,919 Speaker 1: every month just to keep things in balance. On a 109 00:05:09,000 --> 00:05:11,280 Speaker 1: trend basis, we would say a hundred and forty. Obviously, 110 00:05:11,320 --> 00:05:13,680 Speaker 1: months to months, the labor supply jumps about a little bit, 111 00:05:13,720 --> 00:05:16,120 Speaker 1: so you can see the unemployment rate not move, But 112 00:05:16,240 --> 00:05:18,200 Speaker 1: on a trend basis overy six months, we would say 113 00:05:18,200 --> 00:05:20,240 Speaker 1: a hundred and forty thousand. We're about there. We think 114 00:05:20,640 --> 00:05:22,800 Speaker 1: you're going to be a fixed income strategist. Now, don't 115 00:05:22,839 --> 00:05:25,440 Speaker 1: let you'll know work know that Ferall doesn't know what 116 00:05:25,480 --> 00:05:27,160 Speaker 1: to do with the real yield on Friday, so you've 117 00:05:27,160 --> 00:05:30,400 Speaker 1: got to get them started. Here. It's a backup in yields. 118 00:05:30,520 --> 00:05:33,680 Speaker 1: What is the significance of the recent backup and yields 119 00:05:33,960 --> 00:05:37,760 Speaker 1: higher yields, lower bill not bond prices thirty year band 120 00:05:37,760 --> 00:05:41,559 Speaker 1: two point one seven? What's its signified? So at the moment, 121 00:05:41,600 --> 00:05:44,080 Speaker 1: we're not thinking that this signals a slow down. We 122 00:05:44,120 --> 00:05:45,960 Speaker 1: think that there has been a pickup comes through the 123 00:05:46,000 --> 00:05:49,679 Speaker 1: shift in the inversion. We think perhaps suggests that markets 124 00:05:49,680 --> 00:05:51,520 Speaker 1: are getting a different read on how the Fed's going 125 00:05:51,520 --> 00:05:53,920 Speaker 1: to operate the plumbing of the system. But I think 126 00:05:53,960 --> 00:05:57,440 Speaker 1: longer term, this continued inversion is a risk to the economy. 127 00:05:57,880 --> 00:05:59,800 Speaker 1: To me, it's fascin thing. And how we're you know, 128 00:06:00,279 --> 00:06:03,600 Speaker 1: Fort David for this at all. We're micro analyzing three 129 00:06:03,640 --> 00:06:06,680 Speaker 1: basis points of four basis points of moves in the 130 00:06:06,680 --> 00:06:09,120 Speaker 1: two tents spread. I actually think the move this morning, though, 131 00:06:09,160 --> 00:06:11,760 Speaker 1: is is actually quite significant. The Bank of Japan came 132 00:06:11,800 --> 00:06:15,240 Speaker 1: out on Monday and essentially slashed its purchase ranges for 133 00:06:15,279 --> 00:06:17,599 Speaker 1: four major maturities. Its signaled that it may even be 134 00:06:17,680 --> 00:06:20,839 Speaker 1: inclined to stop buying anything longer than twenty five years. 135 00:06:21,160 --> 00:06:23,800 Speaker 1: The Bank of Japan wants a steepy yield curve. What 136 00:06:23,880 --> 00:06:26,640 Speaker 1: that's meant this morning is that when the Japanese government 137 00:06:26,680 --> 00:06:28,960 Speaker 1: came out with a ten year issue at the weakest 138 00:06:28,960 --> 00:06:31,880 Speaker 1: demanded around about three years, and what did we get 139 00:06:32,160 --> 00:06:35,279 Speaker 1: Exactly what the b o j wanted steepy yield curves. 140 00:06:35,400 --> 00:06:37,080 Speaker 1: And we didn't just get that in Japan we're getting 141 00:06:37,080 --> 00:06:39,080 Speaker 1: that in the United States as well this morning, and 142 00:06:39,120 --> 00:06:42,440 Speaker 1: another point of encouragement, and it's really really early to 143 00:06:42,520 --> 00:06:45,840 Speaker 1: draw any firm conclusions, but it is a point of encouragement. Nevertheless, 144 00:06:46,240 --> 00:06:49,560 Speaker 1: the idea that we have got high yields, steeper yield curves, 145 00:06:49,880 --> 00:06:53,039 Speaker 1: and an echoy market that finished positive in Japan, I 146 00:06:53,160 --> 00:06:55,160 Speaker 1: just wonder if that's a clue, a little nudge for 147 00:06:55,200 --> 00:06:57,360 Speaker 1: the guards e c B to take a look at 148 00:06:57,360 --> 00:06:59,640 Speaker 1: what the Bank of Japan is doing, because if this continues, 149 00:07:00,040 --> 00:07:02,400 Speaker 1: I think it's really encouraging. What's really important to your David, 150 00:07:02,440 --> 00:07:04,440 Speaker 1: And this goes to economics one on one. I'm gonna 151 00:07:04,440 --> 00:07:07,320 Speaker 1: call it green span one on one is the idea 152 00:07:07,640 --> 00:07:10,640 Speaker 1: that if you get a risk on feel in a 153 00:07:10,640 --> 00:07:15,280 Speaker 1: better stock market, that pulls right into a confidence builder 154 00:07:15,720 --> 00:07:19,880 Speaker 1: for a troubled economy. Absolutely, and the corollary of that 155 00:07:20,000 --> 00:07:22,320 Speaker 1: is that one of the biggest risks going further forward. 156 00:07:22,440 --> 00:07:24,880 Speaker 1: So far, we've had a strong household sector, but household 157 00:07:24,920 --> 00:07:26,920 Speaker 1: sector doesn't remain strong if you see a tiny in 158 00:07:26,960 --> 00:07:29,400 Speaker 1: financial conditions, So then we loop all the way back 159 00:07:29,440 --> 00:07:32,080 Speaker 1: to trade. If we get negative news developments coming through 160 00:07:32,080 --> 00:07:34,960 Speaker 1: in trade, that plays the risk through the household sector, 161 00:07:35,000 --> 00:07:38,280 Speaker 1: and that's the bigger risk, not just looking through being 162 00:07:38,400 --> 00:07:41,920 Speaker 1: potentially considering downtown. In one David pitch, come back when 163 00:07:41,920 --> 00:07:44,960 Speaker 1: you saw brexit, he is with an accident this morning 164 00:07:55,600 --> 00:07:58,200 Speaker 1: Sun for one time, keen getting you started on a Tuesday, 165 00:07:58,280 --> 00:08:01,200 Speaker 1: the first date of the fourth quarter. To frame this, 166 00:08:01,280 --> 00:08:04,760 Speaker 1: and particularly for a US audience, we need to look 167 00:08:04,840 --> 00:08:08,680 Speaker 1: at Europe. Timothy graph with US with State Tree Global Market. 168 00:08:08,760 --> 00:08:11,760 Speaker 1: Tim I want to start with why an American audience 169 00:08:12,120 --> 00:08:16,040 Speaker 1: needs to focus on europe dynamics. That's not intuitive, and 170 00:08:16,120 --> 00:08:19,040 Speaker 1: yet there we are weak euro strong dollar le guard 171 00:08:19,120 --> 00:08:22,000 Speaker 1: coming in. Why do you care about Europe if you're 172 00:08:22,040 --> 00:08:27,160 Speaker 1: someone planted in the United States of America? Sure, Tom, absolutely, 173 00:08:27,160 --> 00:08:29,840 Speaker 1: good morning. UM. I think a lot of what happens 174 00:08:29,840 --> 00:08:32,480 Speaker 1: in Europe matters quite a bit for US investors in particular, 175 00:08:33,000 --> 00:08:36,439 Speaker 1: not least given the anchoring of yields caused by central 176 00:08:36,440 --> 00:08:38,800 Speaker 1: bank policies in Europe, which of course have drive and 177 00:08:38,880 --> 00:08:42,560 Speaker 1: driven yields significantly. Lower treasuries tend to respond to that 178 00:08:42,640 --> 00:08:44,760 Speaker 1: and and get a demand, as does the dollar in 179 00:08:44,800 --> 00:08:48,439 Speaker 1: response to that based off of yield differentials. Europe is 180 00:08:48,520 --> 00:08:52,079 Speaker 1: also I think important as kind of where a lot 181 00:08:52,080 --> 00:08:54,720 Speaker 1: of the negative feedback loops as far as trade tensions 182 00:08:54,720 --> 00:08:57,600 Speaker 1: are concerned, are happening in that it is a very 183 00:08:57,679 --> 00:09:01,000 Speaker 1: open economy. You have other smaller European enemies like Sweden 184 00:09:01,040 --> 00:09:03,960 Speaker 1: that are even more open and that respond to these 185 00:09:03,960 --> 00:09:07,640 Speaker 1: trade tensions and particularly the reduction in trade volumes and 186 00:09:08,040 --> 00:09:12,160 Speaker 1: the hits to industrial production growth in emerging markets. They're 187 00:09:12,200 --> 00:09:14,400 Speaker 1: very sensitive and that has global implications that the most 188 00:09:14,400 --> 00:09:16,920 Speaker 1: investors need to pay ten. John Ferroll, this is incredibly 189 00:09:16,960 --> 00:09:19,600 Speaker 1: important what Mr Graff said about feedback loops. To me, 190 00:09:19,720 --> 00:09:22,480 Speaker 1: that's a huge theme in the Yuran. Wou'd t him. 191 00:09:22,520 --> 00:09:24,719 Speaker 1: Let's explore it further. You've been bullished the dollar now 192 00:09:24,760 --> 00:09:27,080 Speaker 1: for what four years, a lot of people trying to 193 00:09:27,080 --> 00:09:30,880 Speaker 1: work out the pieces that pull together to generate the 194 00:09:30,960 --> 00:09:34,040 Speaker 1: circumstances whereby the dollar actually does roll over, and it 195 00:09:34,080 --> 00:09:36,880 Speaker 1: hasn't been the differential story, Tim, So what will it be? 196 00:09:38,400 --> 00:09:41,520 Speaker 1: I'm at this point what I think that the most 197 00:09:41,559 --> 00:09:44,880 Speaker 1: likely approximate cause is a FED that is even more 198 00:09:44,960 --> 00:09:48,439 Speaker 1: dubblish than what markets anticipate. In the markets already anticipates 199 00:09:48,520 --> 00:09:50,440 Speaker 1: some more rate cuts over the coming twelve months, So 200 00:09:50,800 --> 00:09:53,320 Speaker 1: I think it's going to really require that because, as 201 00:09:53,400 --> 00:09:57,600 Speaker 1: you noted, the fall in relative real direct differentials between 202 00:09:57,600 --> 00:09:59,920 Speaker 1: the US and other currencies so far has not impacted it. 203 00:10:00,000 --> 00:10:03,160 Speaker 1: You have clear dollar funding gaps that are showing up 204 00:10:03,280 --> 00:10:08,160 Speaker 1: on foreign balance sheets. You have funding dislocations in the US, 205 00:10:08,280 --> 00:10:09,760 Speaker 1: or a night market as we've seen the last couple 206 00:10:09,800 --> 00:10:12,360 Speaker 1: of weeks, all of which speak to to me at 207 00:10:12,400 --> 00:10:16,640 Speaker 1: least a structural demand for dollars that even the easier 208 00:10:16,640 --> 00:10:19,040 Speaker 1: FED policy we've seen over recent months is not enough 209 00:10:19,040 --> 00:10:21,560 Speaker 1: to quench. And so I think the response of the 210 00:10:21,559 --> 00:10:24,600 Speaker 1: FED is probably the key variable here. And that's kind 211 00:10:24,640 --> 00:10:26,480 Speaker 1: of why, even though I'm looking for reasons to be 212 00:10:26,520 --> 00:10:28,640 Speaker 1: negative on the dollar, I can't really find them, because 213 00:10:29,040 --> 00:10:31,160 Speaker 1: at least as far as the way the FED is 214 00:10:31,200 --> 00:10:35,000 Speaker 1: currently speaking, I don't see that shift happening at least 215 00:10:35,040 --> 00:10:37,280 Speaker 1: for the next several months. Too many people have struggled 216 00:10:37,320 --> 00:10:39,560 Speaker 1: to get the dollar call right, especially over the last 217 00:10:39,559 --> 00:10:42,440 Speaker 1: couple of years. The consensus view right now is to 218 00:10:42,480 --> 00:10:46,520 Speaker 1: be shut the global cycle to some degree, and certainly 219 00:10:46,559 --> 00:10:49,000 Speaker 1: not to be long the inflation story, tim is the 220 00:10:49,080 --> 00:10:52,760 Speaker 1: some optionality there that you want to take? Yeah, I 221 00:10:52,800 --> 00:10:55,480 Speaker 1: think as much as I don't see, you know, the 222 00:10:55,520 --> 00:10:58,960 Speaker 1: FED needing to respond to a lot of the the 223 00:10:59,200 --> 00:11:03,080 Speaker 1: disinflationary conditions and and continuing to to ease policy a 224 00:11:03,120 --> 00:11:05,800 Speaker 1: lot further. I think break evens, it's just our tips 225 00:11:05,840 --> 00:11:08,920 Speaker 1: in general, look attractive from a risk reward perspective. Basically, 226 00:11:08,920 --> 00:11:12,160 Speaker 1: as you say, no one is contemplating the possibility of inflation, 227 00:11:12,240 --> 00:11:14,800 Speaker 1: and I suspect that's kind of probably going to be 228 00:11:14,840 --> 00:11:17,720 Speaker 1: the reality while we're in this environment of trade tensions. 229 00:11:17,800 --> 00:11:21,120 Speaker 1: But the fall and forward break evens too, not just 230 00:11:21,160 --> 00:11:24,199 Speaker 1: in the US but elsewhere, has been so aggressive towards 231 00:11:24,280 --> 00:11:27,640 Speaker 1: multi year lows that I think risk reward favors having 232 00:11:27,720 --> 00:11:30,280 Speaker 1: at least some inflation protection as part of a portfolio. 233 00:11:30,360 --> 00:11:32,880 Speaker 1: Even if you know you do get continued falls and 234 00:11:32,960 --> 00:11:36,120 Speaker 1: nominal yields and inflation protection, inflation protection will still do 235 00:11:36,160 --> 00:11:38,720 Speaker 1: relatively well, just not as well as nominals it end 236 00:11:38,760 --> 00:11:44,880 Speaker 1: growth inflation protection. That's a good question. Yeah, it probably 237 00:11:45,000 --> 00:11:47,440 Speaker 1: in this day and age, it probably is, and that 238 00:11:47,960 --> 00:11:49,800 Speaker 1: you know, that was the narrative we had a couple 239 00:11:49,800 --> 00:11:51,800 Speaker 1: of years ago when stocks were the new bonds, when 240 00:11:51,800 --> 00:11:55,240 Speaker 1: the SMP DI it end yield rose above nominal yields 241 00:11:55,280 --> 00:11:57,840 Speaker 1: as it has done recently, and so I suspect It 242 00:11:57,880 --> 00:12:00,720 Speaker 1: probably is as good of an inflation brea to protection 243 00:12:00,720 --> 00:12:03,560 Speaker 1: as anything else. Right now, Tim grit to catch up, 244 00:12:03,600 --> 00:12:07,040 Speaker 1: the Timothy graph sty straight ahead of a mere Macris strategists, 245 00:12:07,040 --> 00:12:20,280 Speaker 1: wang In on global markets tongue a lock fun here. 246 00:12:20,280 --> 00:12:23,559 Speaker 1: It's October one, Q four. All the stresses out there, 247 00:12:23,600 --> 00:12:27,080 Speaker 1: the pageantry we're seeing in China just extraordinary, the very 248 00:12:27,160 --> 00:12:31,000 Speaker 1: serious protests in Hong Kong as well, And we need 249 00:12:31,040 --> 00:12:33,480 Speaker 1: to describe. And we have a guest here that can 250 00:12:33,640 --> 00:12:37,360 Speaker 1: absolutely nail this, which is what we always hope for 251 00:12:38,160 --> 00:12:43,840 Speaker 1: at Bloomberg Surveillance. Tottenham's playing the Germans. Man City is 252 00:12:43,840 --> 00:12:50,520 Speaker 1: playing Denomos Zagreb. But did I get that? Was like close? Yeah? Real? 253 00:12:50,720 --> 00:12:55,400 Speaker 1: What's club Bruge, Club Bruge? What is going on? What's 254 00:12:55,400 --> 00:12:57,560 Speaker 1: the Champions League's when with the big clubs in Europe 255 00:12:57,559 --> 00:13:01,200 Speaker 1: playing each other? Is this bigger than pre your football? Yeah? 256 00:13:01,200 --> 00:13:03,160 Speaker 1: To win the Champions League is massive. It is like 257 00:13:03,200 --> 00:13:06,800 Speaker 1: a bigger deal than like Man City last year. Yeah, 258 00:13:07,040 --> 00:13:09,200 Speaker 1: Liverpool win in the Champions League. I think Man City 259 00:13:09,240 --> 00:13:10,960 Speaker 1: would have liked to have done what Liverpool did last 260 00:13:11,000 --> 00:13:14,160 Speaker 1: year and win the Champions League. Is it a locomotive Moscow? 261 00:13:14,360 --> 00:13:17,840 Speaker 1: Or is it so this is this is the group stage. 262 00:13:18,360 --> 00:13:20,320 Speaker 1: So this is the group stage. You have to come 263 00:13:20,360 --> 00:13:24,640 Speaker 1: top two, which group advance in the knockout stages? Lets 264 00:13:24,800 --> 00:13:30,040 Speaker 1: have the longest Investco Investco dim When you and the 265 00:13:30,080 --> 00:13:34,880 Speaker 1: rest of you are watching ten games at one time, Uh, 266 00:13:35,320 --> 00:13:39,559 Speaker 1: they do look at me like I'm an alien um 267 00:13:40,200 --> 00:13:42,800 Speaker 1: when what the the whole father is about? But you know, 268 00:13:42,840 --> 00:13:44,840 Speaker 1: it's the greatest sport in the world. And the Champions 269 00:13:44,920 --> 00:13:49,520 Speaker 1: League is really the the Acropolis, the Olympus soccer. I agree, 270 00:13:49,559 --> 00:13:51,920 Speaker 1: it's just a beautiful thing. First in the tears here, 271 00:13:52,320 --> 00:13:55,199 Speaker 1: you're gonna watch some of it, like Juventus bear Is 272 00:13:55,240 --> 00:13:57,400 Speaker 1: that like a big deal? That's a nice game to watch. 273 00:13:57,400 --> 00:13:59,079 Speaker 1: You should watch. That is so like one game here 274 00:13:59,080 --> 00:14:01,480 Speaker 1: I need to focus on. Oh, come on, Liverpool's playing 275 00:14:01,520 --> 00:14:04,480 Speaker 1: Red Bull tomorrow. I would say that the pick of 276 00:14:04,559 --> 00:14:09,240 Speaker 1: the peak of today and tomorrow is Barcelona Inter tomorrow 277 00:14:09,480 --> 00:14:13,120 Speaker 1: at three pm. Okay, focus, which is an inter Milan 278 00:14:13,280 --> 00:14:16,280 Speaker 1: is a less team. We welcome all of you coast 279 00:14:16,280 --> 00:14:19,640 Speaker 1: to coast across. They're still with us. Let's go to 280 00:14:19,760 --> 00:14:23,760 Speaker 1: let's turn it within your research note to America, which 281 00:14:23,800 --> 00:14:27,280 Speaker 1: is Investco, which was you know, the combination with Oppenheimer's 282 00:14:27,440 --> 00:14:32,000 Speaker 1: all about international investment, but you're saying America first, that's 283 00:14:32,040 --> 00:14:36,600 Speaker 1: still not time to overweight international. Yes, the cyclical forces 284 00:14:36,640 --> 00:14:39,640 Speaker 1: are still suggesting that um U S equities are still 285 00:14:39,680 --> 00:14:42,040 Speaker 1: the better place to be, both from a from a 286 00:14:42,160 --> 00:14:46,120 Speaker 1: policy standpoint, as well as the dynamism within the private sector, 287 00:14:46,160 --> 00:14:50,440 Speaker 1: the resilience in the private sector. Certainly, valuations and long 288 00:14:50,560 --> 00:14:53,920 Speaker 1: term prospects are now beginning. Long term expected returns are 289 00:14:54,120 --> 00:14:58,240 Speaker 1: looking more attractive in foreign markets, including emerging mode. What's 290 00:14:58,280 --> 00:15:01,680 Speaker 1: the catalyst for me to have the code? Exactly? You 291 00:15:01,720 --> 00:15:03,920 Speaker 1: always need the catalyst. Valuations don't make a trade. What 292 00:15:04,040 --> 00:15:06,720 Speaker 1: will the catalysts be? We need to see that the 293 00:15:06,920 --> 00:15:11,320 Speaker 1: turnaround in in emerging market Emerging markets growth, I think, 294 00:15:11,440 --> 00:15:15,000 Speaker 1: is what's going to lead us into this rotation trade. 295 00:15:15,280 --> 00:15:19,760 Speaker 1: But it may well take first that general global recession 296 00:15:20,520 --> 00:15:24,000 Speaker 1: to reset the clock. Remember the G twenty in Argentina 297 00:15:24,320 --> 00:15:27,560 Speaker 1: around about twelve months ago. Remember remember what the market 298 00:15:27,600 --> 00:15:30,800 Speaker 1: was looking for also is looking for a truce with 299 00:15:30,920 --> 00:15:33,160 Speaker 1: China and the United States, and that's actually what we 300 00:15:33,280 --> 00:15:36,920 Speaker 1: got the G twenty in Argentina. It wasn't enough to 301 00:15:36,920 --> 00:15:39,720 Speaker 1: stop an ugly Q four and the consensus for you 302 00:15:39,800 --> 00:15:42,320 Speaker 1: that I keep hearing looking out through the rest of 303 00:15:42,360 --> 00:15:45,480 Speaker 1: this quarter and looking into is that it will be 304 00:15:45,520 --> 00:15:48,840 Speaker 1: defined by the trade story. The trade story holds the 305 00:15:48,920 --> 00:15:52,480 Speaker 1: keys to what will happen the fate of assets cross 306 00:15:52,520 --> 00:15:55,640 Speaker 1: asset and worldwide. And so do you think we're missing 307 00:15:55,640 --> 00:15:58,080 Speaker 1: the broader story because a lot of people thought that 308 00:15:58,080 --> 00:16:00,560 Speaker 1: would define Q four and that's really not what defined 309 00:16:00,600 --> 00:16:03,480 Speaker 1: Q for What defined Q forwards a series of monegy 310 00:16:03,480 --> 00:16:06,520 Speaker 1: policy mistakes. Looking back on things, what do you think 311 00:16:06,560 --> 00:16:09,920 Speaker 1: really determines the outcome of assets governed out twelve months? 312 00:16:09,920 --> 00:16:11,600 Speaker 1: And can we really say it's just one thing, it's 313 00:16:11,600 --> 00:16:14,360 Speaker 1: the outcome of the tride story. I think we're going 314 00:16:14,360 --> 00:16:18,600 Speaker 1: out twelve months, that's still the story really because monetary policy, 315 00:16:18,840 --> 00:16:22,480 Speaker 1: as as we've discussed in the past, cannot really offset that. 316 00:16:22,600 --> 00:16:25,720 Speaker 1: There's we're now pushing on a string. And today's and 317 00:16:26,000 --> 00:16:27,400 Speaker 1: with the bond sell off is a bit of an 318 00:16:27,400 --> 00:16:31,320 Speaker 1: example of that. UM and equity evaluations are otherwise very stretched. 319 00:16:31,360 --> 00:16:36,080 Speaker 1: So to be honest, uh, bond yields are the asset 320 00:16:36,120 --> 00:16:41,240 Speaker 1: class that has reflected most cleanly that trade bearishness and 321 00:16:41,360 --> 00:16:45,960 Speaker 1: bond lower bond yells is what is maintaining high equity 322 00:16:45,960 --> 00:16:48,840 Speaker 1: evaluations globally. Where you see the impact of that trade 323 00:16:48,880 --> 00:16:52,200 Speaker 1: war is really in this outperformance of US equities compared 324 00:16:52,240 --> 00:16:56,160 Speaker 1: to international and emerging market equities. That spread, given the 325 00:16:56,160 --> 00:16:59,760 Speaker 1: global expansion that we've seen otherwise, doesn't make sense. Right. 326 00:17:00,200 --> 00:17:04,400 Speaker 1: Trade is affecting foreign markets much more than US domestic 327 00:17:04,440 --> 00:17:08,520 Speaker 1: markets because of the much larger propensity. But this is 328 00:17:08,560 --> 00:17:12,840 Speaker 1: fascinating because if we get a successful trade agreement, even John, 329 00:17:12,880 --> 00:17:15,640 Speaker 1: as you're complaining earlier, if it's just some quick thing 330 00:17:15,680 --> 00:17:19,040 Speaker 1: to get through to the politics of that's bad for 331 00:17:19,200 --> 00:17:22,480 Speaker 1: US equities because the side relief will shift US to 332 00:17:22,600 --> 00:17:26,560 Speaker 1: abid an international On a relative basis, that should be 333 00:17:26,640 --> 00:17:29,960 Speaker 1: far more positive for international markets than US markets. Does 334 00:17:30,000 --> 00:17:32,919 Speaker 1: it mean that US equities should suffer outright? No, that, 335 00:17:33,040 --> 00:17:36,000 Speaker 1: but on a basis on really important folks. I mean, 336 00:17:36,040 --> 00:17:38,320 Speaker 1: this is one of the great bets of Q four. John, 337 00:17:38,320 --> 00:17:40,520 Speaker 1: you okay over there, Yeah, I'm just following the conversation. 338 00:17:40,600 --> 00:17:45,439 Speaker 1: Do you think Milan really can do it again? How 339 00:17:45,480 --> 00:17:49,040 Speaker 1: would speaking? That wasn't what I was thinking about. If 340 00:17:49,080 --> 00:17:51,119 Speaker 1: you've got some real stats, to the real stats, you're 341 00:17:51,160 --> 00:17:54,160 Speaker 1: making them up. I'm reading, folks, on reading this, I'm 342 00:17:54,160 --> 00:17:56,680 Speaker 1: read on this and like like Pharaoh's over there reading 343 00:17:56,680 --> 00:18:00,520 Speaker 1: it on next the Washington always told thalking about the 344 00:18:00,520 --> 00:18:03,600 Speaker 1: potential about performance abroad and global equities. It started to 345 00:18:03,600 --> 00:18:07,000 Speaker 1: get me thinking about the underperformance of forleign exchange and 346 00:18:07,160 --> 00:18:09,919 Speaker 1: for the U S Dollar against G ten. And I 347 00:18:09,920 --> 00:18:12,439 Speaker 1: think if you really want to construct the story to 348 00:18:12,560 --> 00:18:17,160 Speaker 1: tell that develops into a weaker dollar story, you need 349 00:18:17,200 --> 00:18:20,000 Speaker 1: to be telling me good things about global growth. You 350 00:18:20,040 --> 00:18:22,840 Speaker 1: need to be telling me a better story of global trade. 351 00:18:23,200 --> 00:18:26,200 Speaker 1: Can you tell me a better story in that unlocks 352 00:18:26,240 --> 00:18:32,320 Speaker 1: that dollar weakness? It would have to be in relative terms. 353 00:18:32,359 --> 00:18:37,200 Speaker 1: I think it's bearing a successful trade negotiation that creates 354 00:18:37,200 --> 00:18:39,680 Speaker 1: that catalyst that thom was talking about, that catalyst to 355 00:18:40,240 --> 00:18:44,399 Speaker 1: um accelerate foreign growth. The the only other element, the 356 00:18:44,440 --> 00:18:48,119 Speaker 1: only other narrative that you can build, is a surprising 357 00:18:48,720 --> 00:18:54,200 Speaker 1: deceleration in US growth their own relative terms, UH raises 358 00:18:54,280 --> 00:18:58,360 Speaker 1: the attractiveness of foreign markets given we're how we're currently priced. 359 00:18:58,560 --> 00:19:03,320 Speaker 1: The positioning in fair ever of US asset classes is 360 00:19:04,440 --> 00:19:08,240 Speaker 1: now really a multi year high. Right. Any asset class 361 00:19:08,240 --> 00:19:11,880 Speaker 1: you pick, bonds, credit, equities, U S, s A classes 362 00:19:11,920 --> 00:19:15,000 Speaker 1: have outperformed for there are foreign counter parties now for 363 00:19:15,119 --> 00:19:19,160 Speaker 1: many many years. The potential for that rotation and the 364 00:19:19,200 --> 00:19:21,840 Speaker 1: turnaround in expeditions is very powerful. I want to wrap 365 00:19:21,840 --> 00:19:23,440 Speaker 1: things up on the bond market for our listeners that 366 00:19:23,520 --> 00:19:25,800 Speaker 1: might have just tuned in. We had a tenure bond 367 00:19:25,840 --> 00:19:29,600 Speaker 1: auction in Japan overnight, the weakest demanded around about three years. 368 00:19:29,600 --> 00:19:32,640 Speaker 1: We had some tweaks from the BLJ yesterday which essentially 369 00:19:32,680 --> 00:19:34,159 Speaker 1: meant they really want to wink at the front end 370 00:19:34,200 --> 00:19:36,000 Speaker 1: of the yield curve in Japan. I want to buy 371 00:19:36,080 --> 00:19:38,240 Speaker 1: less of the long end to generate a steeper yeld 372 00:19:38,240 --> 00:19:41,720 Speaker 1: curve that spooks some investors. It's bleeding into global bond markets. 373 00:19:41,720 --> 00:19:45,000 Speaker 1: Steeper curbs, higher yields. Do you think that the e 374 00:19:45,119 --> 00:19:47,119 Speaker 1: c B, and this is really aimed at the e 375 00:19:47,240 --> 00:19:49,919 Speaker 1: c B. We'll be looking at Governor Coroda right now 376 00:19:49,920 --> 00:19:52,760 Speaker 1: in the Bank of Japan and thinking if this works, 377 00:19:53,160 --> 00:19:56,480 Speaker 1: if risk assets, equities credit can do well in a 378 00:19:56,640 --> 00:19:59,679 Speaker 1: rising yield environment because the curve is steeper and at 379 00:19:59,680 --> 00:20:02,119 Speaker 1: the Bank a Japan is being able to adjust the 380 00:20:02,119 --> 00:20:04,960 Speaker 1: modalities of its bond buying program to generate that to 381 00:20:05,040 --> 00:20:08,200 Speaker 1: determine that outcome. Do you think the ECB could follow suit? 382 00:20:10,040 --> 00:20:13,679 Speaker 1: The c B could um I am still skeptical of 383 00:20:13,800 --> 00:20:18,920 Speaker 1: how much steepening of the yield curve we can generate here. Um, 384 00:20:18,960 --> 00:20:21,720 Speaker 1: given the challenges that we have, and given the limited 385 00:20:21,800 --> 00:20:26,879 Speaker 1: prospects on long term nominal growth without a healthy and 386 00:20:27,000 --> 00:20:31,520 Speaker 1: credible rise of inflation let's say just one one and 387 00:20:31,560 --> 00:20:35,480 Speaker 1: a half percent UM, it's very difficult to maintain a 388 00:20:35,520 --> 00:20:38,800 Speaker 1: steeper yield curve from here. Then within that does investors 389 00:20:38,840 --> 00:20:41,320 Speaker 1: suggest scale that people come in, there'll be more M 390 00:20:41,320 --> 00:20:46,440 Speaker 1: and A, etcetera. Q four. I mean, John, it's got 391 00:20:46,440 --> 00:20:48,560 Speaker 1: to happen if you've got nominal GDP that low. I 392 00:20:48,640 --> 00:20:51,879 Speaker 1: mean you get either you do or you begin a 393 00:20:51,960 --> 00:20:57,240 Speaker 1: merging acquisitions discussion before one. Right, Well, yeah, not really 394 00:20:57,320 --> 00:20:59,840 Speaker 1: my turf to to opine on that. I think you 395 00:21:00,040 --> 00:21:04,800 Speaker 1: in trouble. I think the I think the challenges um. 396 00:21:04,880 --> 00:21:08,359 Speaker 1: You know, M and as globally have been really mostly 397 00:21:08,880 --> 00:21:13,080 Speaker 1: a function of it's where, it's where why the borrowing 398 00:21:13,080 --> 00:21:16,480 Speaker 1: has taken place. Like when you look back, we always 399 00:21:16,520 --> 00:21:19,240 Speaker 1: ask ourselves what could be the excesses that bring the 400 00:21:19,320 --> 00:21:22,240 Speaker 1: current cycle to its end. There is none to point 401 00:21:22,240 --> 00:21:24,680 Speaker 1: out unless you look at the non financial corporate death 402 00:21:24,680 --> 00:21:28,760 Speaker 1: sector and all of that leverage has really been deployed 403 00:21:28,840 --> 00:21:31,560 Speaker 1: into share buybacks and m and A activity. If that 404 00:21:31,600 --> 00:21:35,600 Speaker 1: willingness to borrow or to land decreases, that's a part 405 00:21:35,640 --> 00:21:39,960 Speaker 1: of them. Quickly, before you watch Milwaukee Washington and the playoffs? 406 00:21:39,960 --> 00:21:41,840 Speaker 1: Where are you gonna watch Champions League? What's what are 407 00:21:41,840 --> 00:21:45,639 Speaker 1: you watching? The three? It will have to be u Enters. 408 00:21:45,720 --> 00:21:51,960 Speaker 1: I guess that's my my pig for Italian team up six. 409 00:21:52,560 --> 00:22:06,640 Speaker 1: Unless you're in Vasco. Good morning, This is Bloomberg, m John, 410 00:22:06,680 --> 00:22:08,960 Speaker 1: True and Tim Keene. We're focused on the markets. We'll 411 00:22:08,960 --> 00:22:11,360 Speaker 1: get to that in a minute. Right now, we are 412 00:22:11,520 --> 00:22:15,399 Speaker 1: thrilled on the seventieth anniversary of what mao rot have 413 00:22:15,480 --> 00:22:18,639 Speaker 1: Meredith sumter with us if you raise your group, Meredith John, 414 00:22:18,680 --> 00:22:20,920 Speaker 1: I believe Genrett and I can't remember. In the blur 415 00:22:21,000 --> 00:22:25,520 Speaker 1: of the morning, the President tweeting out congratulations President g 416 00:22:25,960 --> 00:22:31,600 Speaker 1: on the seventie anniversary. Translate that how is that treated 417 00:22:31,640 --> 00:22:37,639 Speaker 1: by the Chinese? And how is the president's congratulations given 418 00:22:37,680 --> 00:22:44,840 Speaker 1: the span of seventy years in US Sino relations? The 419 00:22:44,880 --> 00:22:49,359 Speaker 1: President's offering the greetings uh and congratulations on the seventieth anniversary. 420 00:22:49,359 --> 00:22:51,600 Speaker 1: I'm sure it will be warmly received in Beijing, but 421 00:22:51,640 --> 00:22:56,879 Speaker 1: it does not fundamentally change the underlying constraints of these 422 00:22:57,040 --> 00:23:01,040 Speaker 1: the world's too largest economies, finding some kind of reconciliation 423 00:23:01,119 --> 00:23:05,280 Speaker 1: between their two economic models. So look, we're we're we're 424 00:23:05,320 --> 00:23:10,280 Speaker 1: looking at the prospects for some kind of not a 425 00:23:10,320 --> 00:23:14,120 Speaker 1: full fledged deal, but even some kind of of modest 426 00:23:14,160 --> 00:23:17,320 Speaker 1: agreement or arrangement when Leo Hook comes to Washington next 427 00:23:17,359 --> 00:23:21,000 Speaker 1: week that would at least sort of ease an onward 428 00:23:21,160 --> 00:23:24,640 Speaker 1: escalation of tariffs. That's what she Jumping is really focused 429 00:23:24,640 --> 00:23:28,760 Speaker 1: on too. He has is not interested in any comprehensive 430 00:23:28,800 --> 00:23:33,160 Speaker 1: deal with um President Trump. He views President Trump as 431 00:23:33,440 --> 00:23:37,120 Speaker 1: weak beholden to the ballot box. But even further weekend 432 00:23:37,960 --> 00:23:42,359 Speaker 1: after the threat of impeachment and impreachment proceedings which euris 433 00:23:42,400 --> 00:23:45,960 Speaker 1: your group believes will result in the House voting to 434 00:23:46,040 --> 00:23:50,159 Speaker 1: impeach the president and we place a seventy fent probability 435 00:23:50,359 --> 00:23:54,200 Speaker 1: on that. So what we see the Chinese doing essentially 436 00:23:54,240 --> 00:23:56,720 Speaker 1: with and I know Tom, you and Gen are also 437 00:23:56,760 --> 00:23:59,160 Speaker 1: watching this as well. There have been reports that China 438 00:23:59,240 --> 00:24:02,600 Speaker 1: is going to move forward with some soybean purchases. Uh, 439 00:24:02,640 --> 00:24:06,080 Speaker 1: they are moving forward with you know, some further slight 440 00:24:06,200 --> 00:24:10,879 Speaker 1: opening its financial sector. They're doing things to allow for 441 00:24:11,080 --> 00:24:14,000 Speaker 1: an easy enough current tensions, but they're not interested in 442 00:24:14,119 --> 00:24:17,760 Speaker 1: fundamentally coming to the table with the kinds of structural 443 00:24:17,800 --> 00:24:21,160 Speaker 1: reforms that Trump's Washington says it's necessary for a long 444 00:24:21,240 --> 00:24:23,960 Speaker 1: term agreement to take hold. I think in sum to speak, John, 445 00:24:24,000 --> 00:24:27,440 Speaker 1: that was called a complete cave by the United States Meredith. 446 00:24:27,480 --> 00:24:30,199 Speaker 1: Wouldn't that be somewhat disappointing if that's what we do 447 00:24:30,359 --> 00:24:33,480 Speaker 1: get after spending eighteen months to aggressively take on the 448 00:24:33,560 --> 00:24:35,520 Speaker 1: Chinese to do what many people agree is the right 449 00:24:35,560 --> 00:24:37,399 Speaker 1: thing to do, to get them to open up, to 450 00:24:37,440 --> 00:24:39,639 Speaker 1: get them to level the playing field, wouldn't it be 451 00:24:39,680 --> 00:24:43,679 Speaker 1: somewhat disappointing that they caved and absolutely achieved very little. 452 00:24:44,640 --> 00:24:48,760 Speaker 1: That's exactly right, John, And and this is why we 453 00:24:48,800 --> 00:24:50,840 Speaker 1: have this sort of paradox in Washington right now, where 454 00:24:50,880 --> 00:24:54,240 Speaker 1: you have a president because of the political risk from impeachment, 455 00:24:54,720 --> 00:24:58,520 Speaker 1: he is primed to find some kind of arrangement. And 456 00:24:58,600 --> 00:25:00,240 Speaker 1: keep in mind, he's got to keep those repor bign 457 00:25:00,320 --> 00:25:04,439 Speaker 1: senators on his side. Uh, And they're telling him you 458 00:25:04,520 --> 00:25:07,280 Speaker 1: need to stave off on the onward escalation of tariffs. 459 00:25:07,320 --> 00:25:09,680 Speaker 1: So he's got that on the other side, he's got 460 00:25:09,800 --> 00:25:13,080 Speaker 1: nothing from Beijing on the fundamental asks that Bob let 461 00:25:13,160 --> 00:25:16,160 Speaker 1: Heiser has been putting on the table consistently since September, 462 00:25:18,000 --> 00:25:20,480 Speaker 1: and Beijing is just waiting to see who's gonna be 463 00:25:20,520 --> 00:25:23,679 Speaker 1: elected in November. So I think the risk here for 464 00:25:23,760 --> 00:25:26,479 Speaker 1: investors is not so much what's happening in the trade space, 465 00:25:26,920 --> 00:25:29,639 Speaker 1: but the real game is going to come outside of 466 00:25:29,680 --> 00:25:31,439 Speaker 1: the trade space, because the trade space is kind of 467 00:25:31,440 --> 00:25:33,600 Speaker 1: static right now. So you've got to look at the 468 00:25:33,840 --> 00:25:37,320 Speaker 1: at the national security or the non trade areas. And 469 00:25:37,359 --> 00:25:40,560 Speaker 1: that's why the announcements on last Friday, and you know, 470 00:25:40,680 --> 00:25:44,639 Speaker 1: continued over the weekend of uh potential increased US scrutiny 471 00:25:44,680 --> 00:25:48,639 Speaker 1: of Chinese companies listing on US markets. It's that kind 472 00:25:48,680 --> 00:25:52,520 Speaker 1: of onward escalation outside of tariffs that we're gonna be 473 00:25:52,520 --> 00:25:55,280 Speaker 1: watching forth moving forward. I would suggest, Meredith that maybe 474 00:25:55,280 --> 00:25:57,879 Speaker 1: what we could do is have the president throughout the 475 00:25:57,880 --> 00:26:01,080 Speaker 1: first baseball at the Brewers and National Game tonight. That 476 00:26:01,080 --> 00:26:06,000 Speaker 1: would be a good start something. Just to wrap things up. 477 00:26:06,040 --> 00:26:08,240 Speaker 1: I'll go to question with you is often to get 478 00:26:08,280 --> 00:26:10,320 Speaker 1: insight as to what is happening with the Chinese press. 479 00:26:10,720 --> 00:26:12,679 Speaker 1: I'd be really intrigued to find out from you just 480 00:26:12,760 --> 00:26:15,919 Speaker 1: how this impeachment inquiry of speaking Pelosi is playing in 481 00:26:16,080 --> 00:26:19,680 Speaker 1: China right now? What's the story the Chinese people being 482 00:26:19,680 --> 00:26:24,600 Speaker 1: told and how is it resonating with the government. In 483 00:26:24,640 --> 00:26:27,560 Speaker 1: this week, the focus is less on the impeachment and 484 00:26:27,640 --> 00:26:30,320 Speaker 1: more on the seven Daith anniversary, and so there hasn't 485 00:26:30,359 --> 00:26:34,600 Speaker 1: been as much speculation in Chinese press about it. Uh too. 486 00:26:34,920 --> 00:26:37,440 Speaker 1: It's a very foreign concept, I think for the Chinese 487 00:26:37,440 --> 00:26:40,040 Speaker 1: people to look at what they would presume to be 488 00:26:40,080 --> 00:26:43,639 Speaker 1: the most powerful political operator in the United States, the 489 00:26:43,680 --> 00:26:48,120 Speaker 1: most powerful country of the world, being humbled in this way. Uh. 490 00:26:48,200 --> 00:26:50,639 Speaker 1: But you know, if you talk to Chinese contacts in 491 00:26:50,680 --> 00:26:54,439 Speaker 1: the negotiations around the negotiations, this just further confirms for 492 00:26:54,520 --> 00:26:57,920 Speaker 1: Beijing that time is on their side and that as 493 00:26:58,080 --> 00:27:01,199 Speaker 1: you know, President Trump deals with these imp proceedings and 494 00:27:01,240 --> 00:27:03,919 Speaker 1: the political embarrassment to him of being impeached, even if 495 00:27:03,920 --> 00:27:06,560 Speaker 1: he's not going to be removed from office. You know, 496 00:27:06,600 --> 00:27:10,840 Speaker 1: from Beijing's perspective, they're using this time to double down 497 00:27:10,920 --> 00:27:15,080 Speaker 1: on economic resiliency. So as you know, tariffs go up 498 00:27:15,160 --> 00:27:17,520 Speaker 1: with US, they look for other ways to get tariffs 499 00:27:17,560 --> 00:27:19,440 Speaker 1: to come down with other trading partners. They're looking for 500 00:27:19,480 --> 00:27:23,080 Speaker 1: other ways to reform their economy in in China's own 501 00:27:23,160 --> 00:27:26,160 Speaker 1: view of how its economy should be reformed to strengthen 502 00:27:26,200 --> 00:27:29,359 Speaker 1: it for a long term confrontation because they know, regardless 503 00:27:29,480 --> 00:27:32,159 Speaker 1: of whether the president is removed from office, regardless of 504 00:27:32,200 --> 00:27:34,800 Speaker 1: who wins in November, they know they've got a long 505 00:27:34,920 --> 00:27:38,000 Speaker 1: term economic struggle with the United States, and they're preparing 506 00:27:38,040 --> 00:27:43,399 Speaker 1: for that. Meredith sumteror you're with us of uh Mao's 507 00:27:43,800 --> 00:27:58,320 Speaker 1: Chinese Revolution, Meredith Sumter with Eraise your group, Dane Swark 508 00:27:58,400 --> 00:28:00,520 Speaker 1: with us right now, let's get to this, Grant and Dine. 509 00:28:00,560 --> 00:28:03,159 Speaker 1: You just heard John go through the busy week that 510 00:28:03,280 --> 00:28:06,840 Speaker 1: we're going to see. What will we know next Monday. 511 00:28:07,200 --> 00:28:09,199 Speaker 1: I think one of the things will know next Monday 512 00:28:09,320 --> 00:28:12,000 Speaker 1: is just how weak is manufacturing and persisting or are 513 00:28:12,040 --> 00:28:14,320 Speaker 1: we seeing a bit of a dead cat bounce or 514 00:28:14,359 --> 00:28:17,040 Speaker 1: something coming back here. That's been one of the key 515 00:28:17,119 --> 00:28:21,160 Speaker 1: issues we're watching very closely, and more importantly is their 516 00:28:21,240 --> 00:28:23,680 Speaker 1: contagion into the rest of the economy. What we want 517 00:28:23,680 --> 00:28:27,760 Speaker 1: to see is the weakness we've seen tied to growth abroad, 518 00:28:28,000 --> 00:28:30,440 Speaker 1: and the weakness and growth abroad and the trade war 519 00:28:30,760 --> 00:28:33,560 Speaker 1: to start to dissipate instead of compound, and so far 520 00:28:33,840 --> 00:28:36,119 Speaker 1: we've yet to see that done. A ton of data 521 00:28:36,320 --> 00:28:38,440 Speaker 1: through the week. What are the data points out of 522 00:28:38,480 --> 00:28:40,680 Speaker 1: everything we get that you will be closely following the 523 00:28:40,720 --> 00:28:43,480 Speaker 1: most more than anything, well, the I s M and 524 00:28:43,520 --> 00:28:45,480 Speaker 1: the employment of course, the I s M s because 525 00:28:45,480 --> 00:28:47,600 Speaker 1: they give us a sense more on a real time basis. 526 00:28:47,640 --> 00:28:51,000 Speaker 1: And what's interesting is this employment report that we've got 527 00:28:51,040 --> 00:28:54,640 Speaker 1: for the month of September will not include that comes 528 00:28:54,640 --> 00:28:57,320 Speaker 1: out on Friday, will not include the GM strike That 529 00:28:57,360 --> 00:29:01,240 Speaker 1: will if it continues into next week in the October data, 530 00:29:01,280 --> 00:29:03,560 Speaker 1: but it will show up in production as we go forward, 531 00:29:03,560 --> 00:29:07,440 Speaker 1: and things like that and so knockoff effects, those things 532 00:29:07,480 --> 00:29:09,440 Speaker 1: are going to be important. But the employment data on 533 00:29:09,520 --> 00:29:13,440 Speaker 1: Friday really watching participation. Diane Swunk mentioned it there, and 534 00:29:13,480 --> 00:29:16,120 Speaker 1: I would suggest that she is more qualified than anyone 535 00:29:16,200 --> 00:29:19,320 Speaker 1: we speak to day after day after day to speak 536 00:29:19,320 --> 00:29:23,040 Speaker 1: on the atomization of the American labor movement and an 537 00:29:23,200 --> 00:29:27,320 Speaker 1: underreported GM strike. Have you been struck, Diane of how 538 00:29:27,400 --> 00:29:31,800 Speaker 1: it has been underreported this effort at General Motors. I 539 00:29:31,800 --> 00:29:35,080 Speaker 1: think more striking is how few people it includes. I 540 00:29:35,120 --> 00:29:38,440 Speaker 1: remember Peck when I was a kid, when Gianne had 541 00:29:38,520 --> 00:29:41,000 Speaker 1: over six hundred thousand workers. We're talking about fifty eight 542 00:29:41,000 --> 00:29:44,720 Speaker 1: thousand workers UM about fifty thousand workers workers on strike, 543 00:29:44,760 --> 00:29:47,840 Speaker 1: and then the knockoff effects to suppliers and production in 544 00:29:48,000 --> 00:29:51,160 Speaker 1: Canada as well has been idled. So it does have 545 00:29:51,240 --> 00:29:53,479 Speaker 1: an impact, and it many of the workers show up 546 00:29:53,480 --> 00:29:55,440 Speaker 1: in different places and they once did as well. It's 547 00:29:55,440 --> 00:29:58,680 Speaker 1: not just the complete loss of manufacturing at GM, it's 548 00:29:58,680 --> 00:30:02,680 Speaker 1: also the workers that were one classified as workers at 549 00:30:02,720 --> 00:30:05,600 Speaker 1: GM are now classified as you know, service workers outside 550 00:30:05,600 --> 00:30:07,960 Speaker 1: of GM, accountants and things like that. What is the 551 00:30:08,160 --> 00:30:11,800 Speaker 1: urgency to settle this strike for the management of General 552 00:30:11,840 --> 00:30:16,200 Speaker 1: Motors but also for the Greater Midwest region. Well, it's 553 00:30:16,240 --> 00:30:19,200 Speaker 1: really clear at a time it's adding insult to injury 554 00:30:19,320 --> 00:30:21,520 Speaker 1: at a time when we're already feeling the effects of 555 00:30:21,600 --> 00:30:24,320 Speaker 1: terrace in the manufacturing sector. And this is critical as 556 00:30:24,360 --> 00:30:27,480 Speaker 1: it goes through the supplier chain. The supply chain is 557 00:30:27,520 --> 00:30:29,479 Speaker 1: being affected. And I think that's the way we need 558 00:30:29,520 --> 00:30:32,760 Speaker 1: to think about it is the knockoff effects are not insignificant. 559 00:30:32,800 --> 00:30:35,120 Speaker 1: It's hard to make up these days the losses to 560 00:30:35,200 --> 00:30:38,560 Speaker 1: these kinds of things, this manufacturing recession. If you run 561 00:30:38,560 --> 00:30:41,760 Speaker 1: a regression equation, you throw on epsilon and the far right. 562 00:30:42,160 --> 00:30:45,560 Speaker 1: But along the way they are those things, those coefficients. 563 00:30:45,600 --> 00:30:49,960 Speaker 1: How large is the Trump Mercantile coefficient? How large in 564 00:30:50,000 --> 00:30:54,880 Speaker 1: this manufacturing slowdown is the trade war? The trade war 565 00:30:54,960 --> 00:30:57,760 Speaker 1: is certainly a key factor for the US, because what 566 00:30:57,840 --> 00:31:00,280 Speaker 1: we have is a global economic saw down. That's certainly 567 00:31:00,400 --> 00:31:03,360 Speaker 1: is exacerbating it. And it's often, you know when I 568 00:31:03,360 --> 00:31:07,040 Speaker 1: think the trade wars exacerbated weakness, most notably in China. 569 00:31:07,120 --> 00:31:09,640 Speaker 1: So as China was stumbling, we stook our foot out 570 00:31:09,640 --> 00:31:12,720 Speaker 1: and they stub They're stumbling even more and tripping up 571 00:31:13,040 --> 00:31:16,560 Speaker 1: even more. But there's no question that for the US 572 00:31:16,560 --> 00:31:20,120 Speaker 1: this has really been some unintended consequences in terms of 573 00:31:20,120 --> 00:31:22,600 Speaker 1: the fallout effects. We all know that China cheats. There's 574 00:31:22,600 --> 00:31:25,680 Speaker 1: all kinds of issues with regard to our tense relationship 575 00:31:25,760 --> 00:31:27,920 Speaker 1: with China. The question is is this the right way 576 00:31:27,920 --> 00:31:31,560 Speaker 1: to solve them? Given the knockoff effects in the manufacturing sector, 577 00:31:31,640 --> 00:31:33,960 Speaker 1: particularly here in the Midwest where we're feeling at most. 578 00:31:34,320 --> 00:31:36,160 Speaker 1: Let's try and tie all of this together as we 579 00:31:36,240 --> 00:31:38,360 Speaker 1: can with one common theme. It just seems to me 580 00:31:38,400 --> 00:31:40,719 Speaker 1: that the epicenter of a lot of this is a really, 581 00:31:40,880 --> 00:31:45,440 Speaker 1: really weak global autosector right now, Diane, just how much 582 00:31:45,480 --> 00:31:48,960 Speaker 1: is that one sector driving things? Well, it's not the 583 00:31:49,000 --> 00:31:52,080 Speaker 1: only sector driving things, but it is a major you know, ironically, 584 00:31:52,080 --> 00:31:55,120 Speaker 1: the auto sector driving things. This is muhicle sales peaked 585 00:31:55,120 --> 00:31:57,600 Speaker 1: in China some time ago, and that's where it was 586 00:31:57,800 --> 00:32:01,320 Speaker 1: one of the fastest growing markets for the global vehicle autosector. 587 00:32:01,360 --> 00:32:03,520 Speaker 1: It's one of the reasons that Germany is feeling the 588 00:32:03,520 --> 00:32:07,440 Speaker 1: sluggishness it is and um flirting with recession itself at 589 00:32:07,480 --> 00:32:09,880 Speaker 1: this stage of the game. So you really do see 590 00:32:09,880 --> 00:32:12,800 Speaker 1: the effects globally here. But it's more than that alone. 591 00:32:12,800 --> 00:32:15,960 Speaker 1: I think the disruptions to the supply chain throughout our 592 00:32:16,000 --> 00:32:19,120 Speaker 1: economy are really quite large in the global economy, and 593 00:32:19,200 --> 00:32:21,840 Speaker 1: the slowdown the inability to stimulate like we once did. 594 00:32:21,920 --> 00:32:24,160 Speaker 1: Let's face it, we just don't have the tools. Then, 595 00:32:24,520 --> 00:32:26,000 Speaker 1: you know, I don't want to be a Debbie Downing here, 596 00:32:26,040 --> 00:32:29,520 Speaker 1: but that's okay. Is attacks, It really is attacks in 597 00:32:29,560 --> 00:32:32,240 Speaker 1: the economy. Not only the tear of the direct tax, 598 00:32:32,840 --> 00:32:35,360 Speaker 1: but the indirect tax of uncertainty is even greater. That's 599 00:32:35,360 --> 00:32:37,840 Speaker 1: the first in the quarter. You're allowed to be Diane Downer, 600 00:32:38,880 --> 00:32:42,120 Speaker 1: but I'm out of time day and I got like, seriously, 601 00:32:42,120 --> 00:32:44,040 Speaker 1: I got like fifteen more questions and we'll get to 602 00:32:45,840 --> 00:32:48,480 Speaker 1: get her back on. That was brilliant when Thanks for 603 00:32:48,560 --> 00:32:52,960 Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to 604 00:32:53,120 --> 00:32:58,840 Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 605 00:32:59,400 --> 00:33:02,600 Speaker 1: I'm on Twitter her at Tom Keane before the podcast. 606 00:33:02,680 --> 00:33:06,160 Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio