Speaker 1: This is the Bloomberg Surveillance Podcast. I'm Tom Keane, along
Speaker 1: with Jonathan Farrell and Lisa Abramowitz. Join us each day
Speaker 1: for insight from the best an economics, geopolitics, finance and investment.
Speaker 1: Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and
Speaker 1: anywhere you get your podcasts, and always on Bloomberg dot Com,
Speaker 1: the Bloomberg Terminal, and the Bloomberg Business App. Now in
Speaker 1: conversation with James Bullard, the former Saint Louis FED President, R.
Speaker 2: Michael McKee, Well, thank you all very much, and we'd
Speaker 2: like to thank Jim Bullard for coming in and joining
Speaker 2: us today. I would have called you mister President, but
Speaker 2: now why do we call you Dean Bullard?
Speaker 3: I guess you can call you Jim will.
Speaker 2: Jim is the dean of the Daniels School of Business
Speaker 2: now at Purdue University, and we thank you for joining
Speaker 2: us today. I want to start with the dot plot.
Speaker 2: I think we have a picture of the dot plot
Speaker 2: that we can put up for those of you on radio.
Speaker 2: You can look up the dot plot on the fed's website.
Speaker 2: But basically, in June, the last time we put out
Speaker 2: a forecast, there was one lonely dot way at the top,
Speaker 2: saying six and a quarter percent. You left that dot's gone.
Speaker 2: How would you have voted if you were if you
Speaker 2: were there yesterday.
Speaker 4: I thought this was a pretty good decision on the
Speaker 4: part of the Fed here. The higher for longer message
Speaker 4: I think is consistent with the rhetoric we've been hearing
Speaker 4: from the Committee.
Speaker 3: Earlier this year.
Speaker 4: There was widespread prediction that there would be a recession,
Speaker 4: and in the second half of twenty twenty three that
Speaker 4: recession isn't materializing.
Speaker 3: So to the extent you thought that.
Speaker 4: A recession would produce extra downward pressure on inflation that
Speaker 4: had to be taken back out, so you got you
Speaker 4: ended up with a higher for longer message here.
Speaker 3: I think that makes a lot of sense.
Speaker 5: So we don't need higher rates at this point.
Speaker 4: Well, the Committee left the additional rate hike this year
Speaker 4: in the dot plot. I think that may be a
Speaker 4: good thing to do as insurance to make sure that
Speaker 4: core inflation, especially continues to come down at an appropriate
Speaker 4: pace so that the Committee can get back to two
Speaker 4: percent inflation and a reasonable timeframe.
Speaker 3: I think the risks are building.
Speaker 4: That inflation could hang up at a higher level or
Speaker 4: even go higher based on the idea of a reacceleration
Speaker 4: in the US economy. So you have to take account
Speaker 4: of that probability when you're making policy.
Speaker 3: I think the Committee has done that here.
Speaker 5: Well.
Speaker 2: One of the interesting questions is about the forecast.
Speaker 5: John was just talking about it.
Speaker 2: You've got the Fed saying their growth forecast has doubled,
Speaker 2: their unemployment forecasts been cut significantly, and yet they're also
Speaker 2: predicting that PCEE core inflation is going to go down.
Speaker 5: How does that work?
Speaker 4: Well, I think you will get disinflation with you know,
Speaker 4: that's the base case. The question is how fast will
Speaker 4: that disinflation occur. If it's a very slow disinflation, you're
Speaker 4: going to want to keep policy rate higher in order
Speaker 4: to put more pressure on so you get back to
Speaker 4: two percent sooner. And there's a little bit of probability
Speaker 4: that inflation would distallup completely at the current levels, which
Speaker 4: would be unacceptable. It's you know, core inflation has a
Speaker 4: handle depending on how you measure it. You know, in
Speaker 4: the four range is still double or more than double the.
Speaker 3: FEDS target.
Speaker 4: So you've got a long ways to go here, and
Speaker 4: I think you want insurance on the side of making
Speaker 4: sure that you get back to two percent inflation. On
Speaker 4: the real side of the economy, things look pretty good.
Speaker 4: You've got summary acceleration the third quarter here it looks
Speaker 4: like we've talked about it before, and unemployment still with
Speaker 4: the three handle looking very good.
Speaker 2: Jay Powell wouldn't say the words, but it looks like
Speaker 2: the forecast is saying soft landing.
Speaker 3: Yeah.
Speaker 4: I think the prospects for soft landing are very good.
Speaker 4: But you haven't landed until you get inflation back to
Speaker 4: two percent, So you're only part way through this process,
Speaker 4: but prospects are looking good.
Speaker 2: If that's the case, then the question becomes higher for longer?
Speaker 5: How much longer? The Fed took away.
Speaker 2: Fifty basis points of cuts from their forecast for next year,
Speaker 2: But how long do you think you need to lean
Speaker 2: against inflation to have an effect.
Speaker 4: Well, it'll be data dependent on that, but I think
Speaker 4: this idea that you'd have five percent policy rate or
Speaker 4: higher over the next eighteen months or so, I think
Speaker 4: that's significant and shows you resolve on the part of
Speaker 4: Chair Powell and the rest of the committee to get
Speaker 4: inflation lower.
Speaker 3: So that's quite a while.
Speaker 4: I think once you get out beyond that the end
Speaker 4: of twenty four, you get into twenty twenty five.
Speaker 3: Nobody knows at this point.
Speaker 2: Well, that raises the question of lags and how long
Speaker 2: the legs might be if he takes eighteen months to
Speaker 2: bring it down.
Speaker 4: Yeah, I don't know. I haven't liked the long and
Speaker 4: variable lags story for the modern era as much. I
Speaker 4: think a lot of the transmissional monetary policy occurs pretty
Speaker 4: rapidly through financial markets in a way that was not
Speaker 4: the case in the nineteen sixties and fifties that when
Speaker 4: Friedman was talking about long and variable legs. So I
Speaker 4: think I think the economy has changed. Information moves much faster,
Speaker 4: decisions are made, much faster than they would have been
Speaker 4: in the world's more forward looking than they would have.
Speaker 6: Been in.
Speaker 3: The sixties and fifties. So I think.
Speaker 4: You should look for impact today, or more impact today
Speaker 4: than you would have in that earlier era. And so
Speaker 4: by keeping the policy rate high right now, I think
Speaker 4: you can get disinflation to happen now, it's not really
Speaker 4: so much two years from now.
Speaker 2: Well, what kind of economy will we have two years
Speaker 2: from now? We get the pandemic distortions in the economy
Speaker 2: out supply and demand maybe come back into better balance.
Speaker 2: But do we have a new economy do we have
Speaker 2: an old economy?
Speaker 5: Where do you think neutral is We're going back into
Speaker 5: a rate regime that is higher than we were used
Speaker 5: to in the two thousands.
Speaker 4: Yeah, I think we've talked about it before. But one
Speaker 4: of the historical examples that you want to look at
Speaker 4: here is the nineteen ninety four tightening cycle, which was
Speaker 4: not as big as this one, but set up the
Speaker 4: US economy for a stellar second half of the nineteen nineties,
Speaker 4: one of the best periods in US macroeconomic history. So
Speaker 4: if you can get inflation to continue to come down
Speaker 4: here with a pretty strong economy, you could set the
Speaker 4: economy up for a productivity boom and a very strong
Speaker 4: period in the twenty twenties here. So hopefully that's what
Speaker 4: will happen. I think we're only part way through that
Speaker 4: process at this point. But if you really do get
Speaker 4: a soft landing, then you could look at a period
Speaker 4: of good growth, strong labor markets, high productivity growth. So
Speaker 4: I'm not saying that that's definitely going to happen, but
Speaker 4: that's certainly one of the possibilities.
Speaker 5: What happens.
Speaker 2: We'll have only about one question left here, but what
Speaker 2: happens with the labor market going forward? Are we going
Speaker 2: to see ongoing wage pressures because there just aren't enough
Speaker 2: people to fill the jobs out there.
Speaker 4: Yeah, I think the labor supply is somewhat diminished from
Speaker 4: where it would have been a pre pen pandemic or earlier.
Speaker 4: I think you have older workers less willing to come
Speaker 4: back into the workforce, so they're kind of a marginal
Speaker 4: worker type and they're not coming in as much. Their
Speaker 4: nest eggs are pretty pretty robust here with high housing
Speaker 4: prices and relatively high equity prices.
Speaker 3: So I also think.
Speaker 4: Daycare has been kind of decimated by the pandemic, so
Speaker 4: this has.
Speaker 3: Changed arrangements for parents with young children.
Speaker 4: And so you just have a subdued labor supply compared
Speaker 4: to what you would have had pre pandemic, and this
Speaker 4: is leading to continued tightness in the labor market.
Speaker 5: Well, we thank you for coming in.
Speaker 2: We're going to send you back now Tode to graduate
Speaker 2: some more engineers so.
Speaker 5: We can fill those empty labor slots. Jim Bullard, thank
Speaker 5: you for joining us today. We'll send it back to
Speaker 5: you in London.
Speaker 7: He Mike, can you just squeeze one extra question?
Speaker 1: Then?
Speaker 7: Can you ask Jim if there's no value in the
Speaker 7: forecast why they still producing them after that performance from
Speaker 7: Sham and Pow yesterday.
Speaker 6: Can you ask him quickly, Mike.
Speaker 2: Sure, John is asking if there's no value in the forecast,
Speaker 2: then why do they keep producing them?
Speaker 3: Well, it's what we do, I think.
Speaker 4: Yeah, you know, forecasts are useful, but only up to
Speaker 4: a point.
Speaker 3: There's a certain amount of ambient noise in the economy.
Speaker 4: You can't get away from that. But so you you know,
Speaker 4: you can't live with them and you can't live without them.
Speaker 3: I guess that's the way you would say that.
Speaker 5: Thank you very much, John. I hope that answers your question.
Speaker 7: Thanks Mike, just about Mike, appreciate it, buddy, fantastic work,
Speaker 7: just one of the best as always, and bringing performance
Speaker 7: in the news conference from Mike McKay yesterday as well,
Speaker 7: sitting down with the foremast and Lewis FED President Jim billat.
Speaker 1: With Aberdeen SRI Coach of Govidian joins us this morning,
Speaker 1: your senior research economists. The growth issue there is just
Speaker 1: absolutely tangible and Germaine into a shop like Aberdeen as well.
Speaker 1: Are you calling for a recession when you see the
Speaker 1: split of that, the tension of a five to four decision.
Speaker 8: I think that's right. We are looking for a recession
Speaker 8: later this year, actually in one that continues well into
Speaker 8: next year, possibly the first two quarters as well. Now,
Speaker 8: if we look at the data that we've seen recently,
Speaker 8: obviously there can be some revisions in the GDP data.
Speaker 8: We saw quite a contraction in July. Now we are
Speaker 8: expecting perhaps there are some quirks in the data that
Speaker 8: we haven't seen as much industrial action recently, and there
Speaker 8: could be some technical issues and a rebound. But I
Speaker 8: think the outlook for the rest of this year is
Speaker 8: quite weak and we see that as you've mentioned in
Speaker 8: the PMI surveys, both manufacturing and services moving into contraction.
Speaker 9: Let's talk about the market response.
Speaker 10: You are seeing a weaker pound in response to this,
Speaker 10: as many people expected it would. At what point are
Speaker 10: they between ahurakh and a hard place at the Bank
Speaker 10: of England if they don't hike the pound weekends it
Speaker 10: increases in FLA and even as growth slows, how much
Speaker 10: is this going to be a real consideration for them
Speaker 10: going forward?
Speaker 8: I think Obviously imported prices are going to be a consideration.
Speaker 8: But what we saw earlier this yesterday in terms of
Speaker 8: the inflation data was very promising, and I think one
Speaker 8: of the key metrics that they focus on what really
Speaker 8: changed was that core services data. We saw a deceleration
Speaker 8: there as well, but I think it's still very elevated.
Speaker 8: We are still seeing another key metric of wages are
Speaker 8: still very high, and hence this signaling through the split
Speaker 8: and the announcement of PUT. Something that we've been expecting
Speaker 8: for a while is that they will increase the pace
Speaker 8: the run rate, but they've done that today, and I
Speaker 8: think that's an interesting communication.
Speaker 10: What is the signal right from the split other than
Speaker 10: they're just divided. It is a difficult moment. What is
Speaker 10: the signal that you can take away as an economist
Speaker 10: coming up with your own projections.
Speaker 8: I think really what we're seeing is they are worried
Speaker 8: about the recession, They are worried about weaker growth, and
Speaker 8: they think that perhaps going into the rest of this year,
Speaker 8: inflation is likely to continue to decelerate. So what we
Speaker 8: say is the lagged impact of fairly aggressive monetary tightening
Speaker 8: really starting to bite and they're probably thinking right that
Speaker 8: here is a time to pause, but we don't want
Speaker 8: to get too complacent. There are still a lot of
Speaker 8: inflationary pressures ahead and there's a long way to go
Speaker 8: before we go anywhere near target.
Speaker 7: Sree help us understand the bond market move in the
Speaker 7: guilt market right now, Tenure guilt yields higher on the
Speaker 7: session near session highs, up about seven basis points.
Speaker 6: Does that stack up for you?
Speaker 8: I think it's a knee jerk reaction. Perhaps you know
Speaker 8: there is the hawkish signal there is really being the focus,
Speaker 8: I think, But what we will say is, even though
Speaker 8: we are very close to the peak, we do expect
Speaker 8: rates to remain elevated, and we're thinking more matter horn
Speaker 8: rather sorry, more table mountain than matter horn. Really so
Speaker 8: really on hold elevated for a long period of time,
Speaker 8: well into next day.
Speaker 7: Off for an explanation, do you think to some extent
Speaker 7: this might be a Bank of England that's starting to
Speaker 7: become more concerned about growth over inflation and a bond
Speaker 7: market is starting to pick up on the scent of that.
Speaker 8: I think there is a shift.
Speaker 11: I was.
Speaker 8: It was a very very close call, and I think
Speaker 8: that information number really sort of tipped tip this decision.
Speaker 8: There are some other disinflationary pressures with food prices are
Speaker 8: likely to continue to drag down inflations a year end,
Speaker 8: but as you say, we're still nowhere near targets and
Speaker 8: I think that growth, the growth priority has started to
Speaker 8: pick up.
Speaker 1: You Beck, your work at Queen Mary in London. Do
Speaker 1: you find it more beneficial to have a highly visible
Speaker 1: dissenting nuance to split vote like at the Bank of
Speaker 1: England or is it more Are you more able to
Speaker 1: make theory and forward looking views over the we are
Speaker 1: the world, We're all in it together view of the Fed.
Speaker 8: I think the split is part of the signaling. I
Speaker 8: think that's actually quite a useful single and I can
Speaker 8: see that in the bomb markets they're taking this as
Speaker 8: a hawkish pause and that's actually what is necessary in
Speaker 8: a sense in order to continue on this path of disinflation.
Speaker 8: We need to unfortunately, we need a recession to really
Speaker 8: correct some of those imbalances that are quite particular to
Speaker 8: the UK economy.
Speaker 7: No change isn't boring TK in London. No change is
Speaker 7: not boring.
Speaker 6: Full split.
Speaker 1: I'm fascinated by it, and you know, to know the
Speaker 1: heritage of Catherine Mann at MIT and Megan Green at Oxford.
Speaker 1: And these are huge decisions, folks. This is not a
Speaker 1: small matter. And I go back to the real yield
Speaker 1: is Kit Jukes is all over that in this morning
Speaker 1: note as well.
Speaker 7: So thank you Streektch you Governdant of Aberdeen.
Speaker 1: An expert on Saudi Araba. Edward Morris holds court at
Speaker 1: City Group, Global head of Commodity Research and always takes
Speaker 1: a geopolitical look. He has been brilliant over the last
Speaker 1: two years of saying everyone calmed down, we're going to
Speaker 1: see law. There were oil prices, more sustained seventy eighty
Speaker 1: dollars prices, and then things have changed. At Morse what
Speaker 1: changed to elevate oil to one hundred dollars a barrel?
Speaker 12: It was quite simple. A bunch of countries that had
Speaker 12: a lot of surplus capacity decided to rein it in
Speaker 12: and pull back. If you look at the oil market,
Speaker 12: there is no more market. There's no more oversupplied market
Speaker 12: in the world based on supply and demand. But those
Speaker 12: that have the supply have pulled it back, and they
Speaker 12: pulled it back because they didn't like the revenue that
Speaker 12: they were getting So there's a big difference between oil
Speaker 12: and copper and oil and a lot of other commodities
Speaker 12: in terms of the fundamental availability of supply in that market.
Speaker 1: All Right, we were making fun and just of the
Speaker 1: orb and that is of course President Trump visiting Saudi Arabia.
Speaker 1: What is the US relationship now with oil producing Saudi
Speaker 1: Arabia changed?
Speaker 12: Yes, it certainly has changed, and it's changed dramatically. Part
Speaker 12: of the change relates to the geopolitics of the area.
Speaker 12: We saw one element of the change at the G
Speaker 12: twenty meeting when a number of countries that in India
Speaker 12: include countries in the Middle East, including Israel, include the
Speaker 12: European Union decided to build the physical you know, their
Speaker 12: own Belton Road initiative, and they excluded China and the
Speaker 12: excluded Russia from it. But the US is very much
Speaker 12: a part of it. We're talking about Westinghouse technology going
Speaker 12: into Saudi nuclear power, We're talking about guarantee on the
Speaker 12: security side. We're talking about oil markets and common and
Speaker 12: differences among them. But it is a different relationship from
Speaker 12: the more sour one with which the Biden administration began
Speaker 12: its self in office.
Speaker 10: Ed earlier in the year you are the lone caller
Speaker 10: for some sort of lower oil pricing.
Speaker 9: You were absolutely correct.
Speaker 10: Now you're coming out and pushing against people who are
Speaker 10: really upgrading their forecasts for oil in light of some
Speaker 10: of the Saudi Arabian production cuts. How can you be
Speaker 10: so sure this time around if this is essentially Saudi
Speaker 10: Arabia searching for ninety to one hundred dollars a barrel
Speaker 10: of oil for their financial wellbeing.
Speaker 12: Sure well, I think there are three or four factors
Speaker 12: just overwhelming. One of them happens to be what we
Speaker 12: call the Fragile Five countries. They are Iran, A, rat Libya, Nigerian, Nigeria,
Speaker 12: and Venezuela. Their countries out in nineteen ninety eight were
Speaker 12: growing really rapidly in their production. People thought they were
Speaker 12: going to be adding a million barrels a day a year.
Speaker 12: Five years after nineteen ninety eight, they were producing less
Speaker 12: than they were in ninety eight. The world scrambled to
Speaker 12: find new supply and the price of oil went up.
Speaker 12: These countries are adding supply in surprising ways. If you
Speaker 12: look at June versus June twenty twenty three versus twenty
Speaker 12: twenty two, these countries added over a million barrels a
Speaker 12: day to oil supply. If you look at where they
Speaker 12: are now and just look at Iran and a rat
Speaker 12: the chances are that the two of them together are
Speaker 12: going to be adding close to a billion barrels a
Speaker 12: day of production between now and a year from now.
Speaker 12: That very much that big change, and the change is
Speaker 12: not just among the two of them. If you look
Speaker 12: at nigeria'sin so recent elections, they went for the monthly
Speaker 12: average of one to one point two million barrels a
Speaker 12: day to now one point five to one point seven
Speaker 12: million barrels a day. They're at one point seven right now.
Speaker 12: So those fragile clive countries are not under the control
Speaker 12: of the leadership of OPEK plus, and they intend to
Speaker 12: put more oil in the market. A second really massive
Speaker 12: factor is China. China has, yes, an economy that is
Speaker 12: more commodity dependent than any other country in the world.
Speaker 12: But what China has done since the Great Financial Crisis
Speaker 12: and condone it consistently is by low, by low, and
Speaker 12: sell high. So they accumulate an incredible amount of inventory.
Speaker 12: The inventory that they've grown has been from just under
Speaker 12: a billion barrels at the beginning of the pandemic not
Speaker 12: very long ago to billion four hundred million barrels. In
Speaker 12: our judgment right now, with a capacity to go to
Speaker 12: two billion barrels, a billion four hundred million means they
Speaker 12: have one hundred and thirty or one hundred and forty
Speaker 12: days of forward supply in their inventory system. The IEA,
Speaker 12: if its wisdom, says ninety days of forward supply is ample.
Speaker 12: So they're in a position to do what they're now
Speaker 12: doing buying less oil in the market. They had four
Speaker 12: months in which they were buying twelve and a half
Speaker 12: million barrels a day. They have four and a half
Speaker 12: million of their own production. They had months in which
Speaker 12: they had seventeen million of supply. They don't refine more
Speaker 12: than fourteen eight, fourteen nine. They put it in an inventory,
Speaker 12: and now that prices are very high, what are they doing.
Speaker 12: They're selling, and they're selling incrementally an awful lot of
Speaker 12: diesel into a market which is diesel poor and where
Speaker 12: diesel cracks are overwhelming. So they're making money by not
Speaker 12: buying and by selling high on the product side. And
Speaker 12: then we still have a ample production growth from non OPEC.
Speaker 12: Our judgment is that demand is going to be slow
Speaker 12: because of all the macroeconomic trends you guys have been
Speaker 12: talking about for the last fifteen minutes. We don't think
Speaker 12: demand is going to be growing, you know, more than
Speaker 12: a million two maybe barrels a day next year, and
Speaker 12: non OPEC alone can fill that without even thinking about
Speaker 12: the Fragile five or what China is doing. So I
Speaker 12: think you know the way to look at the way
Speaker 12: we look at the trends, it's going to be weaker market.
Speaker 9: Just quickly here ed in the interest of time.
Speaker 10: What you basically said is that China's building its own
Speaker 10: spr that's much bigger than the US, as the US
Speaker 10: was trading their own their own spr How much is
Speaker 10: Saudi Arabia going to keep production low simply because they
Speaker 10: know China is not going to be a big buyer.
Speaker 12: You know, I don't know. I don't know how to
Speaker 12: read the she leaves on it. There was an article
Speaker 12: in Arab News involving a conversation between the Crown Prince
Speaker 12: and the Prime Minister of India at the G twenty meeting,
Speaker 12: and the Crown Prince is quoted in a Saudi newspaper. Therefore,
Speaker 12: its intentional that if oil sustains above a certain level,
Speaker 12: they'll be putting more oil back in the market, or
Speaker 12: they are good chances of it. That was not an
Speaker 12: accidental story, So we don't know what the pressure point is.
Speaker 3: I like ninety.
Speaker 12: They don't like eighty or seventy as much as I
Speaker 12: like ninety, and they're fearful of what happens at one
Speaker 12: hundred ED.
Speaker 7: Thank you sir for the update. Off the desk over
Speaker 7: as city at most not as bulicious sum.
Speaker 1: Right now the interview of the day. This is a
Speaker 1: scheduled six to seven minute interview. It ought to be
Speaker 1: two hours. Kit Chooks joins as Chief Foreign Exchange Strategists
Speaker 1: to Society General and he let his research note today
Speaker 1: with what I was looking at early this morning, and
Speaker 1: that is the change up there. And the change is
Speaker 1: a US real yield back to where it was in
Speaker 1: late winter of two thousand and eight.
Speaker 6: Kit, things are moving.
Speaker 1: Where are we going to be a month from now?
Speaker 1: We're we're going to be a three months from now.
Speaker 13: To itself, and I think in three months time we're
Speaker 13: going to have potentially still higher really odds in the US.
Speaker 13: Keeping on this guy, It's gonna stop at some point,
Speaker 13: I mean part of the discussion is the political one.
Speaker 5: Right.
Speaker 13: The big difference between the United States and Europe is
Speaker 13: that we're all raising rates because we have an inflation problem,
Speaker 13: but we have to tighten fiscal policy. John just said it.
Speaker 13: We can't spend this money. We spend so much money
Speaker 13: on COVID, a war in Ukraine. We have no money,
Speaker 13: and so we're in a difficult place. The United States
Speaker 13: can spend money because it's the United States unless the
Speaker 13: politics says it can't. So as long as the politics
Speaker 13: lets the US be exceptional, you can have high yields
Speaker 13: on a stronger dollar as far as it goes well.
Speaker 1: We've seen in the last forty eight hours, and as
Speaker 1: John mentions Bank of Japan as a hat trick tomorrow,
Speaker 1: do we see with what's moving yen goes through one
Speaker 1: week or yen where all of a sudden the Bank
Speaker 1: of Japan is overcome by Powell and Bailey events.
Speaker 13: They have to do something extraordinary at the Bank of
Speaker 13: Japan to stand in the way of this tide of
Speaker 13: rising yields in the US. So they'll have to raise
Speaker 13: rates or intervene. You know, jaw boning is not going
Speaker 13: to get us much further than we are today.
Speaker 7: So no change in the Fellow Reserve, no change in
Speaker 7: the Bank of England. We expecting any changes from the
Speaker 7: BIJ not tomorrow, but this year.
Speaker 13: So he hinted at you know, I heard someone else
Speaker 13: on the Bank of Japan board sort of row that
Speaker 13: back a little bit and saying he was talking to
Speaker 13: the foreign exchange market. They can't just talk to the
Speaker 13: foreign exchange market. They have to decide what they want
Speaker 13: to do with monetary policy, and it's a tough decision
Speaker 13: given their challenge. But this is so like a baby
Speaker 13: nineteen eighty four or eighty five. I mean, it's somewhere
Speaker 13: in that.
Speaker 7: If you can imagine for those who were babies in
Speaker 7: the mid eighties, kick, can you explain what a baby
Speaker 7: nineteen eighty four.
Speaker 3: I don't want to say.
Speaker 13: I don't want to say that Jay Powell is Paul Vulcan,
Speaker 13: and I don't want to say that Joe Biden is
Speaker 13: Ronald Reagan. But it's this ability to push the dollar
Speaker 13: higher than you could imagine. I was in my first
Speaker 13: I know, everything I thought about fair value for currencies,
Speaker 13: anything I'd learned at the school was blown out of
Speaker 13: the water before we got to plaza. This can you know,
Speaker 13: trying to guess how far you can go at the
Speaker 13: sort of the pointy end of this piece of the
Speaker 13: cycle is really crazy.
Speaker 9: So we don't know how far you can go.
Speaker 10: But we do know that some people are expecting, including
Speaker 10: GP Morgan's chief equity strategist over in Japan, they expect
Speaker 10: that the Bank of Japan will leave yield curve control
Speaker 10: next year and negative rates possibly but even later this year,
Speaker 10: if not early next year. Do we have an understanding
Speaker 10: of what the knock on effects would be, not just
Speaker 10: from a currency perspective but from a rate regime globally.
Speaker 13: I think from generally, you know, they're so far behind
Speaker 13: everybody else that it's possible that it doesn't completely rock
Speaker 13: all the boats in the world.
Speaker 6: Right this is this is a.
Speaker 13: Country where what that would do would start the process
Speaker 13: of Japanese investors buying jgbs again at higher yields instead
Speaker 13: of buying foreign assets. So it has a knock effect
Speaker 13: in the currency market, but they're not as big or
Speaker 13: as an important as a player on a flow basis
Speaker 13: as they were thirty years ago, so it doesn't have
Speaker 13: to be So it doesn't necessarily have to start a
Speaker 13: new long, dramatic rise in global bond yields. But it
Speaker 13: causes waves because it tightens global monetary policy one step
Speaker 13: beyond what we've been seeing. And if you forced the
Speaker 13: Chinese to follow at some point, if they don't want
Speaker 13: the U answer week and you can take this further,
Speaker 13: so it all rolls it down.
Speaker 10: You know, we're talking about a stronger dollar and how
Speaker 10: far that can go at a time where as you
Speaker 10: were saying the US can be exceptional as long as
Speaker 10: lawmakers allow it to be, so, how far can it
Speaker 10: go before it becomes substantially problematic for the rest of
Speaker 10: the world, in particular the UK, in particular Europe.
Speaker 13: I think it's already problematic. I mean you already see
Speaker 13: the Chinese. The Chinese, who usually have complete control over
Speaker 13: things like their currency, don't like the uan weakness. The
Speaker 13: Japanese don't like it. That don't like it there. If
Speaker 13: you send US fields higher on the dollar stronger, you know,
Speaker 13: you could reverse some of the wonderful progress that's been
Speaker 13: made in Latin America in the last few years. So
Speaker 13: we're not far away from people howling about what this
Speaker 13: is doing. I mean, this is the problem, you know,
Speaker 13: the stronger dollar will be much less damaging to the
Speaker 13: United States in the short term than it is to
Speaker 13: other people.
Speaker 1: To me, what's really important here is the analysis of
Speaker 1: a difference between section fourteen Emirates versus section sixty. I mean,
Speaker 1: you really need the elevation to see the Spurs. Was
Speaker 1: it Saturday or Sunday, johnt you see the elevation of
Speaker 1: a section sixty or should you go lower at section fourteen?
Speaker 13: It's a bit noisier downstairs, but I like to be
Speaker 13: able to see both ends of the pitch at the
Speaker 13: same time. I like to look diagonally across the pitch
Speaker 13: so that I can see.
Speaker 1: This is when the Spurs beat Arsenal.
Speaker 13: And I'm very glad I've hidden the way up in
Speaker 13: the nice seats.
Speaker 7: Kit and I have watched the North London Derby together
Speaker 7: many years ago. I think maybe nine years ago, something
Speaker 7: like that, maybe ten years ago.
Speaker 6: It was a good time.
Speaker 7: I think Arsenal absolutely rush Tottenham back then. I think
Speaker 7: Walcut was there.
Speaker 6: He was still there.
Speaker 3: Harry Kane was there as well.
Speaker 1: How come Arsenal has us ownership that's successful and the
Speaker 1: other selected teams.
Speaker 7: D A kid, do you want to explain that when
Speaker 7: you say selected teams, you sang Chelsea, I'm going to go.
Speaker 13: With I'm going to go with. It took a while
Speaker 13: for them to get good at it, but that they
Speaker 13: have a heritage and a history in owning football clubs
Speaker 13: in that family sports.
Speaker 1: Talking about here, Yeah, what about the Saudi money, I mean,
Speaker 1: the Petro dollar money coming in? Is that going to
Speaker 1: change Arsenal and the rest of the sport?
Speaker 13: It changes all sports everywhere to have Saudi money coming
Speaker 13: in until the thing levels itself out. And so the
Speaker 13: problem with sport, I mean in that sense, there's there's
Speaker 13: an enormous amount of money that changes it for the
Speaker 13: average fan, recognizes the fact that the economics of sport
Speaker 13: has changed, which we could talk about for a whole day,
Speaker 13: and and then does does a bunch of things to
Speaker 13: in the short term to the politicization of sport, which
Speaker 13: again you know is an interesting sort of thing. But
Speaker 13: at Arsenal, frankly, the change of manager was possibly the
Speaker 13: big change we made.
Speaker 11: Yeah, Mcalarteta.
Speaker 7: As we mentioned the Tottenham chairman Daniel Levy revealing he'd
Speaker 7: be open to sending a stake in the club, quote
Speaker 7: for the right person, I sat down with Levy for
Speaker 7: a wide ranging interview on the club, including the recent
Speaker 7: sale of star Harry Kane to buy Munich.
Speaker 6: Take a listen.
Speaker 14: So Harry was willing to stay, but he wasn't willing
Speaker 14: this summer to sign a new contract. He didn't say
Speaker 14: that to me that he wants to leave. He didn't
Speaker 14: say that he would never sign a new contract. He
Speaker 14: wouldn't commit this summer, And of course we were in
Speaker 14: a very difficult position, had one year on his contract,
Speaker 14: and as a club, as I said, with self sufficient,
Speaker 14: we couldn't live in a dream that he would sign
Speaker 14: a contract. We had no guarantee. And therefore, when Bayern
Speaker 14: Munich came along, he was willing to go to Buyer
Speaker 14: Munich and we agree to do.
Speaker 7: You've since disclosed there is a buy back clause that's
Speaker 7: getting a lot of attention and a lot of fans excited.
Speaker 7: Can we talk about the terms of that buy back clause?
Speaker 6: What is it?
Speaker 14: If I'm honest, I think you know the actual precise
Speaker 14: detail of the contract with Bayern Munich should remain confidential.
Speaker 14: All I would say is if Harry one day wants
Speaker 14: to come back to the Premier League and he wants
Speaker 14: to come to top them, we would have the ability
Speaker 14: to a purchase him.
Speaker 7: We talked a lot about Saudi Arabia and the disruption
Speaker 7: and this summer transfer window, not just for English football,
Speaker 7: for the whole European football. Are you getting players knocking
Speaker 7: the door now saying I've seen nay Maas contract in
Speaker 7: the newspaper and I want a slice of that.
Speaker 6: Has this changed things for you?
Speaker 14: I think you have to look at the Saldi Arabia situation.
Speaker 14: As you know, it gave a huge influx of money
Speaker 14: into the market. The market is particularly tough out side
Speaker 14: of the UK at the moment, and I don't see
Speaker 14: that what's happening in Saudi Arabia is going to have
Speaker 14: any direct bearing in terms of player contracts in Europe.
Speaker 6: What do you expect it will change?
Speaker 14: Well, it's another market for players to look to. Not
Speaker 14: every player will want to go to South Arabia, but
Speaker 14: just as not every player.
Speaker 6: Wants to go to Germany or France or or whoever.
Speaker 7: Joe Lewis has got his own legal problems. He's transferred
Speaker 7: his hold in the football club to family trust. We
Speaker 7: understand that dynamic and how things have changed in the
Speaker 7: last couple of years on that front. Technically that means
Speaker 7: you no longer have that big billionaire backer.
Speaker 6: Do you need one to succeed? Is that something that
Speaker 6: Tottenham needs?
Speaker 14: Well, firstly, you know, the ownership of Tottenham has been
Speaker 14: of no relevance for the operations of Tottenham for the
Speaker 14: last twenty plus years. It's always been self sufficient as
Speaker 14: far as you know, very wealthy people owning football clubs.
Speaker 6: As I said, the new rules.
Speaker 14: Now are going to be engineered to such an extent
Speaker 14: that hopefully you don't need to be a very wealthy
Speaker 14: owner in order to have a successful club.
Speaker 6: Would you be up into selling a steak?
Speaker 14: I've always my answer that question has always been the
Speaker 14: same for twenty three years. We have thirty thousand shareholders, yeah,
Speaker 14: who own approxibly thirteen and a half percent. We run
Speaker 14: this club as if it's a public company. If anyone
Speaker 14: wants to make a serious proposition to the border of Tottenham,
Speaker 14: we will consider it along with our advisors, and if
Speaker 14: we felt it was in the interest of the club,
Speaker 14: we would be open to anything.
Speaker 6: Has anyone made an offer over.
Speaker 14: The years, Many people have made offers, but there's never
Speaker 14: been an offer that's been.
Speaker 7: Well, give us an idea of what those officers have
Speaker 7: looked like. Where'd they come from?
Speaker 14: All parts of the world, the Far East, the Middle East, America.
Speaker 14: But nothing has been put on our table that we
Speaker 14: felt it has been in the interest of shareholders.
Speaker 7: The stadium has been a big project for you and
Speaker 7: clearly that's right for the club and other people are
Speaker 7: starting to copy you as well. How big of initiative
Speaker 7: has that been for Tottenham Football Club? And how do
Speaker 7: you think it's going to really underpin the success and
Speaker 7: not just years to come, but potentially decades.
Speaker 14: I think people don't realize how big a project building
Speaker 14: a stadium is. You know that project took us probably
Speaker 14: about seventeen eighteen years and start to finish. I think
Speaker 14: you've got to take a very very long term view.
Speaker 14: I think that it obviously has a major impact on
Speaker 14: the club, positive and negative.
Speaker 6: Because you know, you don't build a.
Speaker 7: Stadium for nothing, a multi purpose stadium as well. It's
Speaker 7: not just about football anymore. Is it's music, concerts, It's
Speaker 7: about everything about everything else and all above.
Speaker 6: Well, that was done for two reasons.
Speaker 14: One is, you know, when you look at the cost
Speaker 14: of building a stadium is talking about such huge sums
Speaker 14: of money. In our case it was one of the
Speaker 14: quarter of billion pounds. I think today it would be
Speaker 14: over two billion.
Speaker 6: Wow.
Speaker 14: And you have to find ways of paying for that
Speaker 14: asset and just having football club football games is not
Speaker 14: enough of income to.
Speaker 6: So what does music bring in?
Speaker 7: Daniel, give me an idea of what a Taylor Swift
Speaker 7: Beyonce music concert brings in for Tottenham?
Speaker 6: How much money can you make from something like that?
Speaker 14: Well, every concert's different every so it's not just concerts,
Speaker 14: it's boxing, rugby, all all sorts of events. You're not
Speaker 14: going to justify spending the money by all those other events.
Speaker 14: What they do that they make a contribution to the
Speaker 14: capital costs. I would say that you know, over a
Speaker 14: four year we may make twenty thirty million pounds of
Speaker 14: additional revenue as result in it.
Speaker 7: And what's the gate receipts look like just in terms
Speaker 7: of football over a season. How does that compare? How
Speaker 7: does that stack up?
Speaker 14: Well, our gate receipts now over over one hundred million pounds.
Speaker 7: Big ange has come after Antonio Conte and Jose Mourinho.
Speaker 7: Can we talk about dealing with difficult characters? What was
Speaker 7: it like dealing with Antonio Conte near the end.
Speaker 14: Do you know I had a good relationship with both,
Speaker 14: with both, with both Jose and Antonio, they're different. And
Speaker 14: you know, as I said to my and for them
Speaker 14: a couple last night, I said to them, you know,
Speaker 14: I made a mistake the stake. They are great managers,
Speaker 14: they were just not right for this club. And you know,
Speaker 14: the way they want to win is different really for
Speaker 14: how we need to win.
Speaker 6: What does that mean? They're proven winners? What does that mean?
Speaker 3: So I think there's a couple of things.
Speaker 14: I think our style of football that our fans prave
Speaker 14: for is we want attacking football and if that means
Speaker 14: winning four.
Speaker 6: To three, then so be it.
Speaker 14: Whereas I think their style of football is, you know,
Speaker 14: they don't mind being defensive and winning one nil, And
Speaker 14: we were in a situation where we were so desperate
Speaker 14: to win. I think at that moment in time, when
Speaker 14: I go back, you know, four or five years ago,
Speaker 14: I think we would have one taken any way of winning.
Speaker 6: But we didn't win.
Speaker 14: And therefore, when you don't win, you get a very
Speaker 14: disgust grunt a fan base.
Speaker 7: With our fans, Where did the pressure come from to
Speaker 7: begin with, to hire names like that. I was listening
Speaker 7: to the recent fans forum you did, and you mentioned
Speaker 7: that certain players wanted a certain kind of manager. You
Speaker 7: alluded to that, I'm paraphrasing to some extent. Were there
Speaker 7: certain players that wanted that kind of name Jose Mouridio
Speaker 7: and Antonio Conte.
Speaker 6: Do they come and knock the door and ask for that?
Speaker 14: It wasn't It wasn't about the name. It was about
Speaker 14: they wanted to win just as much as I did.
Speaker 14: And then we'd got we'd come so close with Maritzo,
Speaker 14: who was a great a great manager, and he did
Speaker 14: fantastic things for this football club, and we we got
Speaker 14: we got frustrated, and I think we went through a
Speaker 14: phase where we said, well, let's try something different and
Speaker 14: it didn't work.
Speaker 7: Define success for this season, Let's finish there. What is
Speaker 7: success for you this year?
Speaker 14: That's a difficult one for me to answer, because then
Speaker 14: I think I'd be putting an unfair.
Speaker 6: Pressure on my on my new coach.
Speaker 14: Honestly, I think for us, though, we want to play
Speaker 14: football where we're entertained. We want to come to a
Speaker 14: game where we're looking forward to coming to the game
Speaker 14: where we believe we have a really good chance of
Speaker 14: We just want to entertain our fans, entertain and win, course, win,
Speaker 14: but win with style.
Speaker 6: Daniel Levy the to him Chairman.
Speaker 7: We'll put out the full conversation over the next week
Speaker 7: or so, but a pretty extensive conversation with the longest
Speaker 7: serving chairman of a Premier League football club.
Speaker 1: Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and
Speaker 1: anywhere else you get your podcasts. Listen live every weekday
Speaker 1: starting at seven am Eastern. I'm Bloomberg dot Com, the
Speaker 1: iHeartRadio app tune In, and the Bloomberg Business app. You
Speaker 1: can watch us live on Bloomberg Television and always I'm
Speaker 1: the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, and
Speaker 1: this is Bloomberg