1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jaily. 2 00:00:13,960 --> 00:00:16,960 Speaker 1: We bring you insight from the best in economics, finance, 3 00:00:17,040 --> 00:00:23,480 Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,680 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Let's 5 00:00:27,760 --> 00:00:29,920 Speaker 1: Turn to Market. Seem A Shaw with us in London here, 6 00:00:30,040 --> 00:00:34,520 Speaker 1: the chief strategists for the Principal Global Investors Group, sure 7 00:00:34,640 --> 00:00:36,520 Speaker 1: that she could be with us. I love your note 8 00:00:36,680 --> 00:00:39,720 Speaker 1: because it's short and right to the point. And Seema, 9 00:00:39,840 --> 00:00:43,199 Speaker 1: you have some wonderful phrases that I need you to 10 00:00:43,200 --> 00:00:46,840 Speaker 1: explain to our audience across America and worldwide. I love 11 00:00:46,920 --> 00:00:50,400 Speaker 1: the idea of the vertico of equities. This is at 12 00:00:50,800 --> 00:00:54,960 Speaker 1: Alfred Hitchcock. Is it? What is equity vertico for next year? 13 00:00:55,600 --> 00:00:58,840 Speaker 1: So what it means, Tom, is we're expecting equity to 14 00:00:58,880 --> 00:01:02,040 Speaker 1: continue to rise next year, really inflated by central bank easing, 15 00:01:02,040 --> 00:01:05,440 Speaker 1: not really inflated by very strong economics. And as they 16 00:01:05,440 --> 00:01:07,840 Speaker 1: continue to rise and those valuations become more and more 17 00:01:07,840 --> 00:01:12,080 Speaker 1: expensive and disconnected from weak economics, it means that you're 18 00:01:12,080 --> 00:01:14,360 Speaker 1: going to get to the point where investors are getting 19 00:01:14,360 --> 00:01:17,280 Speaker 1: increasingly scared of the heights of equities. Now that's not 20 00:01:17,280 --> 00:01:19,840 Speaker 1: mean to say that we expect an ectingmarket correction next year, 21 00:01:19,880 --> 00:01:22,039 Speaker 1: but we are certainly getting closer with that vertigo and 22 00:01:22,080 --> 00:01:24,800 Speaker 1: people start to feel a bit sick. Is it a bubble? 23 00:01:24,959 --> 00:01:27,240 Speaker 1: Is it? By definition? I think of Steve Roach, the 24 00:01:27,360 --> 00:01:31,000 Speaker 1: legend from Morgan Stanley now Yale, or even chairman Bernankey. 25 00:01:31,520 --> 00:01:33,640 Speaker 1: You know, I hate this phrase when it works here 26 00:01:33,520 --> 00:01:36,720 Speaker 1: are is it on the edge of bubble territory? I 27 00:01:36,760 --> 00:01:38,840 Speaker 1: think there's a fair number of people who would say that. 28 00:01:38,920 --> 00:01:41,880 Speaker 1: I would say, however, that you have got the prospect 29 00:01:41,880 --> 00:01:44,520 Speaker 1: of economics catching up, So it's not a done deal 30 00:01:44,560 --> 00:01:46,920 Speaker 1: that the bubble will continue to inflate, inflate, inflate, but 31 00:01:46,959 --> 00:01:49,160 Speaker 1: you could get economis catching up with it. But at 32 00:01:49,160 --> 00:01:51,640 Speaker 1: this stage certainly valuations are very expected, but they will 33 00:01:51,680 --> 00:01:53,800 Speaker 1: be continue to be supported by central banks. So I 34 00:01:53,840 --> 00:01:57,200 Speaker 1: want to go someplace else. Is the shift international? Is 35 00:01:57,240 --> 00:02:00,400 Speaker 1: the shift to stay with us big cap? Something work 36 00:02:00,520 --> 00:02:03,200 Speaker 1: this year? Is it a year of stick with what works? 37 00:02:03,360 --> 00:02:06,120 Speaker 1: Or is it a year of shifting to new ideas? 38 00:02:06,800 --> 00:02:08,440 Speaker 1: So it's a little bit of both. You stick with 39 00:02:08,520 --> 00:02:10,239 Speaker 1: some of the stuff that has worked really well, such 40 00:02:10,280 --> 00:02:12,720 Speaker 1: as megacaps. As you said, some of the defensive areas 41 00:02:12,760 --> 00:02:15,160 Speaker 1: like real estate, we also continue to like. But also 42 00:02:15,240 --> 00:02:16,679 Speaker 1: as we go into next year, there's going to be 43 00:02:16,720 --> 00:02:20,280 Speaker 1: increasing opportunities, which will be important because investors need to 44 00:02:20,320 --> 00:02:22,399 Speaker 1: have a stake in the upside, which we do think 45 00:02:22,440 --> 00:02:25,840 Speaker 1: there will be opportunities for I look at the rest 46 00:02:25,880 --> 00:02:28,600 Speaker 1: of your note and and again, what's so great about 47 00:02:28,639 --> 00:02:33,000 Speaker 1: it is it's really brief. But you talk about risk velocity, 48 00:02:33,080 --> 00:02:36,119 Speaker 1: you talk about I guess what is this a quickening 49 00:02:36,240 --> 00:02:38,760 Speaker 1: of risk? Yeah? What is? You know? We we tend 50 00:02:38,800 --> 00:02:40,520 Speaker 1: to look talk about the number of risks out there, 51 00:02:40,560 --> 00:02:44,079 Speaker 1: but we never think about how quickly it transitions to portfolios. 52 00:02:44,360 --> 00:02:46,200 Speaker 1: So that's what we're expecting next year. There's a number 53 00:02:46,240 --> 00:02:49,160 Speaker 1: of different factors, but at least from this perspective, governments 54 00:02:49,160 --> 00:02:51,640 Speaker 1: and political interference and a number of things we've been 55 00:02:51,639 --> 00:02:54,080 Speaker 1: seen increasing over the next two last two years, and 56 00:02:54,160 --> 00:02:56,480 Speaker 1: we expect that to continue as governments take a larger 57 00:02:56,600 --> 00:02:59,120 Speaker 1: role than central banks have. And then you see a 58 00:02:59,160 --> 00:03:02,239 Speaker 1: lot of the risks, she's a trade war. Eventually transitioning 59 00:03:02,240 --> 00:03:05,200 Speaker 1: to the portfolio is very quickly. Seema lease over here 60 00:03:05,240 --> 00:03:07,440 Speaker 1: in New York and one thing when we're talking about bubbles, 61 00:03:07,520 --> 00:03:10,280 Speaker 1: I have to say it's not all stocks, because there 62 00:03:10,280 --> 00:03:11,960 Speaker 1: have been certain stocks that have been beaten up, the 63 00:03:12,000 --> 00:03:16,080 Speaker 1: stocks that resemble bonds or do best when bonds are rallying. Uh. 64 00:03:16,160 --> 00:03:19,120 Speaker 1: Some people are concerned that the valuations there have gotten 65 00:03:19,360 --> 00:03:23,640 Speaker 1: incredibly inflated. I'm talking about utilities or real estate investment trust. 66 00:03:23,800 --> 00:03:27,120 Speaker 1: How concerned are you about a massive dried out, a 67 00:03:27,160 --> 00:03:30,400 Speaker 1: massive sell off in those particular stocks. I mean, I 68 00:03:30,400 --> 00:03:32,040 Speaker 1: think it is a concern. And I think that as 69 00:03:32,040 --> 00:03:36,000 Speaker 1: we see those valuations that disconnect between some which extremely overvalid, 70 00:03:36,040 --> 00:03:38,440 Speaker 1: which is some which are relatively cheap by history. If 71 00:03:38,440 --> 00:03:41,120 Speaker 1: you do get that very technical shift, you could see 72 00:03:41,200 --> 00:03:43,720 Speaker 1: a very very sharp move. So was that risk velocity 73 00:03:43,760 --> 00:03:46,240 Speaker 1: coming through very sharply? And a number of the areas 74 00:03:46,280 --> 00:03:48,680 Speaker 1: that have performed extremely well, and you've named a couple 75 00:03:48,680 --> 00:03:51,120 Speaker 1: of theres such as utilities, Sama, I'm just wondering who's 76 00:03:51,120 --> 00:03:53,960 Speaker 1: participated in this particular rolley this year. The Wall Street 77 00:03:54,000 --> 00:03:56,520 Speaker 1: Journal out with a fascinating article yesterday referring to some 78 00:03:56,640 --> 00:03:59,520 Speaker 1: data from Refinitive lip A that said investors have pulled 79 00:03:59,680 --> 00:04:02,960 Speaker 1: one hundred and thirty five point five billion dollars from 80 00:04:03,080 --> 00:04:05,800 Speaker 1: US stop focused mutual funds and etf so far this year, 81 00:04:05,840 --> 00:04:10,200 Speaker 1: the biggest withdrawals on record Seema, who's been in the 82 00:04:10,280 --> 00:04:13,320 Speaker 1: market to take advantage of this. You know, when we 83 00:04:13,400 --> 00:04:15,760 Speaker 1: talked to investors, actually, even looking back to the first 84 00:04:15,800 --> 00:04:17,320 Speaker 1: quarter of this year, when there were still a lot 85 00:04:17,360 --> 00:04:20,120 Speaker 1: of concerns, the first question we would get from investors 86 00:04:20,200 --> 00:04:22,120 Speaker 1: was when can I put my money back to work? 87 00:04:22,200 --> 00:04:24,520 Speaker 1: They were desperate, So as soon as there were any 88 00:04:24,600 --> 00:04:27,400 Speaker 1: indications to come in, that's when people started plowing in. 89 00:04:27,480 --> 00:04:30,520 Speaker 1: And we've seen movement from from from hedge hedge funds. 90 00:04:30,760 --> 00:04:32,400 Speaker 1: There's been a lot of the momentum trading and a 91 00:04:32,400 --> 00:04:33,719 Speaker 1: lot of the e t f s as well, playing 92 00:04:33,720 --> 00:04:35,760 Speaker 1: on this on this game, well, this is a really 93 00:04:35,760 --> 00:04:39,120 Speaker 1: important idea. Though Cliff first quarted in zero Head yesterday 94 00:04:39,560 --> 00:04:43,680 Speaker 1: it was brilliant about the cliche there's money on the sidelines? 95 00:04:44,440 --> 00:04:46,880 Speaker 1: Is there money towards to shreds? Is there money on 96 00:04:46,960 --> 00:04:50,320 Speaker 1: the sidelines? I think there is. You know, from our perspective, 97 00:04:50,320 --> 00:04:52,240 Speaker 1: as long as you don't see a recession on the horizon, 98 00:04:52,680 --> 00:04:55,479 Speaker 1: you should be invested in risk assets. Of course, you 99 00:04:55,480 --> 00:04:57,680 Speaker 1: should protect on you on the downside and the defensive 100 00:04:57,760 --> 00:05:01,000 Speaker 1: space and That's exactly why defensive especially equities, have performed 101 00:05:01,080 --> 00:05:03,280 Speaker 1: so well this year is that people want to put 102 00:05:03,320 --> 00:05:05,760 Speaker 1: their money to work. Now, there were some who didn't 103 00:05:05,760 --> 00:05:07,359 Speaker 1: get back in on the rally at the beginning of 104 00:05:07,360 --> 00:05:10,520 Speaker 1: the year when equities really bottomed um, and so for 105 00:05:10,560 --> 00:05:12,320 Speaker 1: those people, they didn't put it in cash, but they 106 00:05:12,360 --> 00:05:15,279 Speaker 1: just waited desperate to put it back into work. They're desperate. 107 00:05:15,279 --> 00:05:17,480 Speaker 1: I mean, did you sense that desperation right now? I mean, 108 00:05:17,520 --> 00:05:19,600 Speaker 1: we're up twenty. I haven't even looked John, I've been 109 00:05:19,600 --> 00:05:22,760 Speaker 1: so busy over here. Arsenal last night against west Ham, 110 00:05:22,760 --> 00:05:25,280 Speaker 1: Oh mg, that was exciting. Did you watch that gang? 111 00:05:25,400 --> 00:05:29,279 Speaker 1: I watched it. I went to it. The SP five 112 00:05:29,760 --> 00:05:32,080 Speaker 1: so far this year, and you're telling me people are 113 00:05:32,160 --> 00:05:35,600 Speaker 1: dying on the sidelines to get in. Well, not necessarily equities, 114 00:05:35,600 --> 00:05:37,960 Speaker 1: because as you said, they are extremely overvalued, but there 115 00:05:37,960 --> 00:05:40,080 Speaker 1: are you know, people want to get something for their money. 116 00:05:40,120 --> 00:05:41,760 Speaker 1: Where am I going to get that something? That's the 117 00:05:41,800 --> 00:05:44,440 Speaker 1: money question? Yeah, absolutely. So. The couple, the couple of 118 00:05:44,480 --> 00:05:46,400 Speaker 1: areas that we really like for next year is emerging 119 00:05:46,480 --> 00:05:48,960 Speaker 1: market debt. Now that hasn't performed as well as the 120 00:05:49,000 --> 00:05:51,440 Speaker 1: rest of the equity space or the fixed income space, 121 00:05:51,440 --> 00:05:53,640 Speaker 1: and we think that the macro fundamentals for next year 122 00:05:53,839 --> 00:05:55,960 Speaker 1: do look pretty good. The same thing with stuff like 123 00:05:56,040 --> 00:05:59,640 Speaker 1: prefer securities, cocos, they are looking really good. They have 124 00:06:00,160 --> 00:06:01,960 Speaker 1: the banking sect has been beaten up in a number 125 00:06:02,000 --> 00:06:04,359 Speaker 1: of possible well, but they are protected by government, so 126 00:06:04,400 --> 00:06:06,840 Speaker 1: that's another upside. But we also really like some of 127 00:06:06,880 --> 00:06:10,960 Speaker 1: the liquid assets, specifically private real estate. Sema, thank you 128 00:06:11,000 --> 00:06:14,359 Speaker 1: so much, Semach just wonderful. Well, really I love it. 129 00:06:14,520 --> 00:06:17,120 Speaker 1: I get these fifty page two thousand twenty things. It's 130 00:06:17,160 --> 00:06:19,720 Speaker 1: got time to read that, Thank you so much. With 131 00:06:19,960 --> 00:06:24,520 Speaker 1: Principal Global Investors, five themes that will shape the markets. 132 00:06:38,520 --> 00:06:40,840 Speaker 1: And now the most frustrating rest we have in all 133 00:06:40,920 --> 00:06:44,440 Speaker 1: of Lubrick surveillance because when the journalist John Fenby walks 134 00:06:44,440 --> 00:06:46,560 Speaker 1: in the door with his prolific writing, you don't know 135 00:06:46,600 --> 00:06:49,240 Speaker 1: what to talk about. Should we talk about France and 136 00:06:49,279 --> 00:06:51,719 Speaker 1: its classic one volume on France? Should we talk about 137 00:06:51,720 --> 00:06:55,880 Speaker 1: his new effort Crucible about coming out of World War Two? 138 00:06:56,760 --> 00:07:00,960 Speaker 1: Or the new edition of your classic Penguin book on China? 139 00:07:01,240 --> 00:07:04,320 Speaker 1: Lisa Bramwitt said, go there. So that's what we're gonna do. 140 00:07:05,279 --> 00:07:08,440 Speaker 1: On China. We have a president gy is it a 141 00:07:08,560 --> 00:07:11,960 Speaker 1: fallback to Mao. Is the new leadership of China a 142 00:07:12,120 --> 00:07:15,840 Speaker 1: redux of Mao? It's not a redux to Mao in 143 00:07:15,960 --> 00:07:20,440 Speaker 1: terms of ideology and so on. He still believes in 144 00:07:22,080 --> 00:07:25,880 Speaker 1: the reforms, the economic reforms, post things, things shaping, but 145 00:07:26,000 --> 00:07:28,360 Speaker 1: he believes in the kind of power and the power 146 00:07:28,480 --> 00:07:32,480 Speaker 1: centralization which we had on the Mao. So it's it's 147 00:07:32,680 --> 00:07:36,720 Speaker 1: a term in terms of how China is run from 148 00:07:36,760 --> 00:07:39,480 Speaker 1: the very top, but not necessarily in all the details 149 00:07:39,480 --> 00:07:41,640 Speaker 1: of how it's run. There are three or four people 150 00:07:41,680 --> 00:07:44,480 Speaker 1: that had the courage to write on all of China, 151 00:07:44,560 --> 00:07:47,520 Speaker 1: like you have of course the giant Jonathan Spence, and 152 00:07:47,520 --> 00:07:52,040 Speaker 1: and you Mr Fenby as well. Within writing on China 153 00:07:52,320 --> 00:07:54,560 Speaker 1: is the response of the restaurant world. How do you 154 00:07:54,640 --> 00:07:59,720 Speaker 1: synthesize President Trump's response to China? His China to his 155 00:08:00,480 --> 00:08:03,920 Speaker 1: It's very erratic, i'd say, is the phrase, what we 156 00:08:04,000 --> 00:08:07,960 Speaker 1: don't have from the United States is a coherent policy 157 00:08:08,240 --> 00:08:13,000 Speaker 1: towards China, whereas She jinping is pretty coherent. I'm not 158 00:08:13,080 --> 00:08:16,560 Speaker 1: a great fan for the idea that China always sets 159 00:08:16,640 --> 00:08:20,240 Speaker 1: things in very very long term planning, but they are 160 00:08:20,280 --> 00:08:22,360 Speaker 1: doing that Visa v. Trump at the moment and the 161 00:08:22,360 --> 00:08:25,600 Speaker 1: clearest memories of being in Hong Kong with Governor Cheng 162 00:08:25,880 --> 00:08:29,280 Speaker 1: the day the w t O began to splinter apart. 163 00:08:29,440 --> 00:08:33,240 Speaker 1: Now we're really talking about the end of that multilateral experiment. 164 00:08:33,559 --> 00:08:36,960 Speaker 1: How critical is it that we see how crucial is 165 00:08:37,000 --> 00:08:40,640 Speaker 1: it rather that we see the w t O drift away? Well, 166 00:08:41,000 --> 00:08:44,800 Speaker 1: China likes likes the w t O, and the danger 167 00:08:44,880 --> 00:08:49,640 Speaker 1: if you get into a series of bilateral arrangements on 168 00:08:49,760 --> 00:08:54,000 Speaker 1: trade rather than having an overarching organization like the w 169 00:08:54,120 --> 00:08:56,920 Speaker 1: t O is that China will make an awful lot 170 00:08:56,920 --> 00:09:01,880 Speaker 1: of deals around the world using its economic cloud quite 171 00:09:02,080 --> 00:09:07,600 Speaker 1: nakedly to gain political influence. Jonathan, giving your vast experience 172 00:09:07,720 --> 00:09:10,400 Speaker 1: in China and with China, i'd love your perspective on 173 00:09:10,440 --> 00:09:12,240 Speaker 1: a question that Jonathan Faro has been asking all morning, 174 00:09:12,240 --> 00:09:15,040 Speaker 1: which is a really good question. Is the silence that 175 00:09:15,120 --> 00:09:18,319 Speaker 1: we've been hearing around the December fifteen tariffs a good 176 00:09:18,320 --> 00:09:20,800 Speaker 1: thing or a bad thing in terms of them actually 177 00:09:20,880 --> 00:09:23,760 Speaker 1: reaching some sort of accord. It shows I think that 178 00:09:23,800 --> 00:09:27,240 Speaker 1: they are down to very serious negotiation at the moment. 179 00:09:28,040 --> 00:09:32,520 Speaker 1: This is less the negotiation by tweet and silence from 180 00:09:32,600 --> 00:09:36,880 Speaker 1: the Chinese side, and it's more a sign that they 181 00:09:36,920 --> 00:09:41,120 Speaker 1: are getting down to real nitty gritty elements here, and 182 00:09:41,240 --> 00:09:46,360 Speaker 1: that involves, of course increased Chinese purchases of American goods, 183 00:09:46,360 --> 00:09:50,480 Speaker 1: particularly agriculture, but also it will require some indication from 184 00:09:50,520 --> 00:09:53,319 Speaker 1: the U S side that they're willing to consider tariff 185 00:09:53,440 --> 00:09:57,720 Speaker 1: rollbacks or further delays in tariffs to keep the Chinese happy. 186 00:09:57,880 --> 00:10:01,280 Speaker 1: Another big question sort of overhang all of these negotiations 187 00:10:01,320 --> 00:10:03,280 Speaker 1: is who has more to lose? And there was data 188 00:10:03,320 --> 00:10:07,600 Speaker 1: coming out overnight about China's consumer inflation accelerating to a 189 00:10:07,720 --> 00:10:10,320 Speaker 1: seven year high in November. This largely rides in the 190 00:10:10,320 --> 00:10:14,120 Speaker 1: back of higher pork prices, but you see factory prices declining. 191 00:10:14,160 --> 00:10:17,439 Speaker 1: This raises the specter of stagflation, of a concern for 192 00:10:17,679 --> 00:10:20,120 Speaker 1: the PBOC what they are going to do in order 193 00:10:20,160 --> 00:10:23,319 Speaker 1: to juic growth without causing a sort of hyper inflation 194 00:10:23,720 --> 00:10:26,360 Speaker 1: that that impedes the economy. How should we view this? 195 00:10:26,720 --> 00:10:30,199 Speaker 1: How concerned is the PBOC at this point? It is 196 00:10:30,240 --> 00:10:35,920 Speaker 1: pretty concerned, I think, and it's traditional transition mechanisms aren't 197 00:10:35,960 --> 00:10:39,160 Speaker 1: working as well as they used to, and you have 198 00:10:39,200 --> 00:10:42,840 Speaker 1: a leadership in Beijing which doesn't want to go for 199 00:10:42,880 --> 00:10:47,200 Speaker 1: the old fashioned stop go big stimulus packages that we've 200 00:10:47,200 --> 00:10:50,400 Speaker 1: seen since two thousand and eight. They want a more managed, 201 00:10:50,480 --> 00:10:53,760 Speaker 1: more stable economy, and they're trying to do this in 202 00:10:53,800 --> 00:10:56,280 Speaker 1: the middle of the trade war, and that's difficult, and 203 00:10:56,320 --> 00:10:58,679 Speaker 1: we can't let you go without a discussion. A crucible, 204 00:10:58,760 --> 00:11:02,640 Speaker 1: You're right, prolifically, Jonathan Fenby. Crucible is about a time. 205 00:11:02,640 --> 00:11:05,480 Speaker 1: It seems so important right now. Is it the end 206 00:11:05,480 --> 00:11:07,719 Speaker 1: of World War two? It's the end of World War two? 207 00:11:07,760 --> 00:11:11,520 Speaker 1: And it's the really the emergence of the new World system, 208 00:11:11,559 --> 00:11:15,160 Speaker 1: both through the US involvement in the world and lots 209 00:11:15,160 --> 00:11:17,160 Speaker 1: and lots of other things happening all across the globe. 210 00:11:17,480 --> 00:11:19,840 Speaker 1: What's the distinction there? I mean, I think of the 211 00:11:19,880 --> 00:11:25,040 Speaker 1: starvation in Europe, those difficult years of literally famine before 212 00:11:25,080 --> 00:11:29,320 Speaker 1: the Marshall Plan, is well, did the US get that right? 213 00:11:29,400 --> 00:11:32,440 Speaker 1: And can we get that spirit back? The US I 214 00:11:32,480 --> 00:11:35,480 Speaker 1: think got that right. In fact, they were quite helped 215 00:11:35,679 --> 00:11:38,360 Speaker 1: by the Soviet Union and the way that Starling got 216 00:11:38,360 --> 00:11:40,880 Speaker 1: it wrong for most of the time. The US got 217 00:11:40,880 --> 00:11:45,160 Speaker 1: it right through the Marshall Plan, through NATO, the establishment 218 00:11:45,280 --> 00:11:47,440 Speaker 1: NATO and so on. And it needs that kind of 219 00:11:47,480 --> 00:11:50,960 Speaker 1: commitment which you saw from the Truman administration to get 220 00:11:51,000 --> 00:11:53,720 Speaker 1: things going again. I've got another two hours of questions 221 00:11:54,400 --> 00:11:57,120 Speaker 1: another time, Jonathan Fanbi, thank you so much, folks. I'm 222 00:11:57,120 --> 00:11:59,600 Speaker 1: going to cut to the chase. His one volume in 223 00:11:59,720 --> 00:12:04,600 Speaker 1: China is absolutely definitive. It is a sprawling history, particularly 224 00:12:04,640 --> 00:12:09,080 Speaker 1: of modern China. His one volume on France is just 225 00:12:09,240 --> 00:12:12,239 Speaker 1: the single best thing out there, particularly on the cultural 226 00:12:12,720 --> 00:12:16,520 Speaker 1: aspects of what make the French different and crucible thirteen 227 00:12:16,559 --> 00:12:19,960 Speaker 1: months that forged our world with the emotion of awe 228 00:12:20,000 --> 00:12:37,480 Speaker 1: after World War Two. It is always a joy to 229 00:12:37,559 --> 00:12:40,160 Speaker 1: speak to Jean Claude Triche. There are too many things 230 00:12:40,200 --> 00:12:44,480 Speaker 1: to talk about, including European central banking. Lisa Brando, It's 231 00:12:44,480 --> 00:12:46,640 Speaker 1: would like a three hour interview. I guess we can't 232 00:12:46,640 --> 00:12:50,520 Speaker 1: do that today, Lisa, but we will try forward with 233 00:12:50,640 --> 00:12:55,600 Speaker 1: President Tryche on too many European topics. First, Sean Claude Triche, 234 00:12:55,840 --> 00:12:59,440 Speaker 1: we must speak of the legacy of Paul Voker. We 235 00:12:59,520 --> 00:13:02,560 Speaker 1: know of his courage in the late seventies in the 236 00:13:02,600 --> 00:13:07,360 Speaker 1: early eighties to make tough decisions to force recession and 237 00:13:07,400 --> 00:13:10,880 Speaker 1: to bring down inflation. But then there was a story 238 00:13:11,040 --> 00:13:16,600 Speaker 1: afterward which was almost a study hand uh forward through 239 00:13:16,720 --> 00:13:20,959 Speaker 1: the nineteen eighties, how does Europe find a vocer like 240 00:13:21,280 --> 00:13:26,600 Speaker 1: presence for the next ten years. Well, let me let 241 00:13:26,640 --> 00:13:31,520 Speaker 1: me say, Tom, how sad we are to lose Paul Vulcar. 242 00:13:32,120 --> 00:13:35,800 Speaker 1: Until I would say his last days, he was still active. 243 00:13:36,720 --> 00:13:40,400 Speaker 1: He was still very very keen on giving advice and sentiments. 244 00:13:40,840 --> 00:13:44,640 Speaker 1: And the last book he published, Keeping Arid, has been 245 00:13:44,760 --> 00:13:49,479 Speaker 1: absolutely incredible in terms of lessons to be learned from 246 00:13:49,640 --> 00:13:55,360 Speaker 1: his whole life. He said the three verities are stable prices, 247 00:13:55,400 --> 00:14:00,480 Speaker 1: sound finances, and good government. And he was not putting 248 00:14:00,559 --> 00:14:05,679 Speaker 1: his punctions to say that on sound finance and good government. 249 00:14:06,360 --> 00:14:09,880 Speaker 1: Practically all advanced economy where I'm not up to the 250 00:14:10,080 --> 00:14:16,760 Speaker 1: challenges stable paces. We are still living in the legacy 251 00:14:15,559 --> 00:14:20,160 Speaker 1: right as regards the stable prices, which which gives a 252 00:14:20,200 --> 00:14:25,920 Speaker 1: measure of his own influence and his own achievement. You 253 00:14:26,320 --> 00:14:28,400 Speaker 1: can't say enough about the book keeping out And of 254 00:14:28,440 --> 00:14:31,120 Speaker 1: course this is Mr Foker writing with Bloomberg News. Is 255 00:14:31,200 --> 00:14:35,160 Speaker 1: Christine Harper, great honor of Christine write that book with 256 00:14:35,800 --> 00:14:39,640 Speaker 1: Chairman Walker in his final two years of life. Sean 257 00:14:39,680 --> 00:14:42,240 Speaker 1: claud triche the new phrase. I know John Farrell wants 258 00:14:42,280 --> 00:14:43,720 Speaker 1: to jump in here on it. Let me get the 259 00:14:43,760 --> 00:14:51,120 Speaker 1: conversation started, how does Jean Claude Triche define fiscal space. Well, 260 00:14:51,760 --> 00:14:57,760 Speaker 1: I would say a lot of countries have some fiscal 261 00:14:57,840 --> 00:15:02,280 Speaker 1: space in the advanced to me, and should utilize their 262 00:15:02,280 --> 00:15:08,520 Speaker 1: physical space as resolutely as possible with great determination in 263 00:15:08,600 --> 00:15:12,400 Speaker 1: their interest and in the interest of the continental and 264 00:15:12,440 --> 00:15:17,000 Speaker 1: global economies. Others are in a totally different situation. And 265 00:15:17,080 --> 00:15:20,000 Speaker 1: that's all the difficulty with the concept of physical space 266 00:15:20,640 --> 00:15:24,000 Speaker 1: at the global level as well as at the European level. 267 00:15:24,040 --> 00:15:28,680 Speaker 1: There is a tendency to over simplify the recommendation and 268 00:15:28,760 --> 00:15:32,200 Speaker 1: to say either you should be very sound and reasonable 269 00:15:32,320 --> 00:15:35,680 Speaker 1: as regards the fiscal position, or you should be as 270 00:15:35,720 --> 00:15:41,680 Speaker 1: expensive as possible. But it's not correct to simplify oversimplify 271 00:15:41,800 --> 00:15:46,160 Speaker 1: the recommendation for for a number of countries like Germany 272 00:15:46,280 --> 00:15:51,920 Speaker 1: and the Netherlands as examples, the idea that there should 273 00:15:51,920 --> 00:15:57,720 Speaker 1: be much much I would say aggressive utilization of physical 274 00:15:57,800 --> 00:16:01,720 Speaker 1: space is absolutely right and go without saying in my opinion, 275 00:16:02,280 --> 00:16:05,040 Speaker 1: But others it's not the same. And I hesitate on 276 00:16:05,080 --> 00:16:09,240 Speaker 1: the United States of America to tell you my my understanding, 277 00:16:09,280 --> 00:16:14,440 Speaker 1: because the fiscal position is not signaling a lot of 278 00:16:14,560 --> 00:16:17,520 Speaker 1: physical space in the US, at least in my view, 279 00:16:17,760 --> 00:16:20,600 Speaker 1: Jean claud Le's trying and focus on europe An area 280 00:16:20,640 --> 00:16:23,680 Speaker 1: that you had to oversee as the ECB president since 281 00:16:23,720 --> 00:16:26,360 Speaker 1: twas and at three that was the last time that 282 00:16:26,440 --> 00:16:28,920 Speaker 1: we had a Monechy policy review at the e c B. 283 00:16:29,280 --> 00:16:31,640 Speaker 1: Christine Legard is now undertaking that task. What do you 284 00:16:31,640 --> 00:16:35,920 Speaker 1: think needs to be done well? I think she's right 285 00:16:36,240 --> 00:16:39,640 Speaker 1: to to look at it exactly like the FED looked 286 00:16:39,640 --> 00:16:43,200 Speaker 1: at it in the very recent allions. Still continues if 287 00:16:43,200 --> 00:16:48,560 Speaker 1: I'm not missled. So we we have a number of 288 00:16:48,680 --> 00:16:52,360 Speaker 1: issues that are at stake. Which which are the judgments 289 00:16:52,440 --> 00:16:56,400 Speaker 1: that you are i would say making on non conventional 290 00:16:56,480 --> 00:17:00,640 Speaker 1: measures that have been so so heavily applied by all 291 00:17:00,720 --> 00:17:03,920 Speaker 1: santo bags in the world. Is it something that you 292 00:17:03,920 --> 00:17:08,200 Speaker 1: would consider permanent and structural or is it something which 293 00:17:08,280 --> 00:17:13,119 Speaker 1: was really transitory, waiting for the economies of the advanced 294 00:17:13,320 --> 00:17:18,199 Speaker 1: countries going back to normal themselves. Uh. You have also 295 00:17:18,400 --> 00:17:24,680 Speaker 1: the way how do you run your definition of price stability? 296 00:17:25,040 --> 00:17:29,560 Speaker 1: The United States Fed looked at it through a certain 297 00:17:29,640 --> 00:17:34,560 Speaker 1: angle and concluding provisionally. To my knowledge, we don't change 298 00:17:34,640 --> 00:17:37,800 Speaker 1: the definition of price stability to percent, but we are 299 00:17:37,920 --> 00:17:42,199 Speaker 1: we will be more symmetric in utilizing this uh, this 300 00:17:42,480 --> 00:17:47,600 Speaker 1: definition of price stability, So the same questions might be 301 00:17:47,680 --> 00:17:51,200 Speaker 1: asked in Europe. My own understanding is that the most 302 00:17:51,240 --> 00:17:54,719 Speaker 1: important one is certainly the definition of price stability and 303 00:17:54,760 --> 00:17:59,760 Speaker 1: how do you run that? And I would personally, i 304 00:17:59,760 --> 00:18:04,600 Speaker 1: would say, provisionally, conclude that a change of the figure 305 00:18:05,040 --> 00:18:08,439 Speaker 1: would not be appropriate. Personally, at the time I was 306 00:18:08,480 --> 00:18:11,879 Speaker 1: called myself to go to four percent instead of two percent, 307 00:18:12,280 --> 00:18:13,919 Speaker 1: I don't think it was. It would have been a 308 00:18:13,920 --> 00:18:18,639 Speaker 1: good idea, and today it would appear strange. I don't 309 00:18:18,680 --> 00:18:22,320 Speaker 1: spouse the idea that zero percent or one percent would 310 00:18:22,320 --> 00:18:25,040 Speaker 1: be better. It seems to me that we should not 311 00:18:25,160 --> 00:18:29,240 Speaker 1: forget that the central banks are there to anchor medium 312 00:18:29,240 --> 00:18:34,800 Speaker 1: and long term expectation. And that being said, it's clear 313 00:18:34,880 --> 00:18:39,639 Speaker 1: to me that this running of monetary policy with this 314 00:18:39,760 --> 00:18:44,320 Speaker 1: definition should be symmetric. Of course, I have no hesitation 315 00:18:44,400 --> 00:18:47,240 Speaker 1: on that, but again I don't want to anticipate on 316 00:18:47,359 --> 00:18:49,879 Speaker 1: the meditation of the Governing Council for our lessons to 317 00:18:50,200 --> 00:18:53,440 Speaker 1: worldwide and placed decide that Johning us Humblinberg Radio, John Calatricia, 318 00:18:53,560 --> 00:18:56,720 Speaker 1: the former President of the European Central Bank. Jean Claude, 319 00:18:56,720 --> 00:18:58,560 Speaker 1: the former president of the e. C. B. The one 320 00:18:58,600 --> 00:19:01,080 Speaker 1: that came after you are a Dragon used to say 321 00:19:01,119 --> 00:19:03,400 Speaker 1: that for rights to be higher in the future, then 322 00:19:03,400 --> 00:19:05,879 Speaker 1: needed to be lower. Now that's the argument for negative 323 00:19:05,880 --> 00:19:08,160 Speaker 1: interest rates for much of the last five years or so. 324 00:19:08,440 --> 00:19:12,200 Speaker 1: Do you think we need to reassess that argument? Well, 325 00:19:12,600 --> 00:19:16,680 Speaker 1: again the problem. Of course, it is clear that extraordinary 326 00:19:16,760 --> 00:19:22,720 Speaker 1: accommodating monetary policy, including negative interest rates like in Switzerland 327 00:19:22,920 --> 00:19:27,879 Speaker 1: as minus zero points seven five, or in Sweden, or 328 00:19:27,960 --> 00:19:31,679 Speaker 1: in in some respect in Japan or all this of 329 00:19:31,760 --> 00:19:37,880 Speaker 1: course is extraordinary and associated with very very abnormally low 330 00:19:38,080 --> 00:19:42,359 Speaker 1: level of inflation and also of growth in in the 331 00:19:42,440 --> 00:19:48,600 Speaker 1: advanced economy. Uh. There are of course negatives that are 332 00:19:48,640 --> 00:19:52,880 Speaker 1: associated with this negative interest rates or re accommodating policies 333 00:19:53,240 --> 00:19:56,240 Speaker 1: as well as positives. But the positives, and I share 334 00:19:56,280 --> 00:19:59,199 Speaker 1: the view of the major central banks that considered that 335 00:19:59,240 --> 00:20:02,760 Speaker 1: the positives higher than the negatives. But the negatives should 336 00:20:02,800 --> 00:20:07,080 Speaker 1: not be forgotten. And therefore I hope very much this 337 00:20:07,600 --> 00:20:12,679 Speaker 1: very low it's will not be compulsory for eternity, and 338 00:20:12,960 --> 00:20:15,640 Speaker 1: I hope and I expect that we will go back 339 00:20:15,680 --> 00:20:18,359 Speaker 1: to a more normal situation. But that thing said, it 340 00:20:18,520 --> 00:20:21,439 Speaker 1: is it is not an arbitrary decision of the central 341 00:20:21,480 --> 00:20:24,119 Speaker 1: banks to embark on these accommitting in policies. It is 342 00:20:24,160 --> 00:20:27,639 Speaker 1: because the situation is very demony. This has been wonderful, 343 00:20:27,720 --> 00:20:30,439 Speaker 1: Jean clau Touche, thank you so much, particularly those thoughts 344 00:20:30,440 --> 00:20:33,440 Speaker 1: on Paul Poker this morning. He is the former president 345 00:20:33,920 --> 00:20:50,480 Speaker 1: of the European Central Bank. Please decide that joining us 346 00:20:50,520 --> 00:20:53,680 Speaker 1: here in New York City is David coustin Government Sex Is, 347 00:20:53,760 --> 00:20:57,760 Speaker 1: Chief US equity strategist. Good morning to you, Mr Corston, 348 00:20:57,920 --> 00:21:00,520 Speaker 1: Good morning, optimistic about the year ahead. It give us 349 00:21:00,520 --> 00:21:04,320 Speaker 1: the y. Why is the U S economy is continuing 350 00:21:04,359 --> 00:21:08,359 Speaker 1: to grow and that is important because of the economic 351 00:21:08,400 --> 00:21:13,320 Speaker 1: activity is what drives consumer spending. Consumers of US economy, 352 00:21:13,320 --> 00:21:15,480 Speaker 1: that's what drive earnings, and that's what's likely to take 353 00:21:15,880 --> 00:21:19,439 Speaker 1: the U S stock market higher in aboff average, in 354 00:21:21,200 --> 00:21:24,760 Speaker 1: rising profit margins that will boost EPs by five percent. 355 00:21:25,240 --> 00:21:27,639 Speaker 1: Where the rising profit margins coming from? Why are you 356 00:21:27,680 --> 00:21:30,119 Speaker 1: looking for that type it? Well, the rising profit margins 357 00:21:30,200 --> 00:21:32,200 Speaker 1: really is the fact that this year they came down 358 00:21:32,240 --> 00:21:35,479 Speaker 1: by almost sixty five basis points. Kind of particular, But 359 00:21:35,520 --> 00:21:37,080 Speaker 1: if you really want to look at what's happening, it's 360 00:21:37,160 --> 00:21:40,720 Speaker 1: ultimately revenue growth. And revenue is the story. The unemployment 361 00:21:40,800 --> 00:21:43,320 Speaker 1: right now is the lowest in fifty years, continuing to fall, 362 00:21:43,640 --> 00:21:48,760 Speaker 1: likely driving overall business activity. Technology margins is what really 363 00:21:48,800 --> 00:21:52,199 Speaker 1: distinguishes the United States equity markets from global markets, and 364 00:21:52,240 --> 00:21:55,239 Speaker 1: the tech margins are now above and so in some 365 00:21:55,320 --> 00:21:57,680 Speaker 1: cases you'll see them come down, but really coming down 366 00:21:57,720 --> 00:22:00,119 Speaker 1: from a very very high levels compared with every whe 367 00:22:00,119 --> 00:22:02,280 Speaker 1: else in the world. I know, Tom is over there 368 00:22:02,280 --> 00:22:04,720 Speaker 1: in London. There's very low profit mars over there. Tom, 369 00:22:04,760 --> 00:22:07,160 Speaker 1: you want to have more profit margins come here. Well, 370 00:22:07,440 --> 00:22:09,960 Speaker 1: I will say that there is some concern about a 371 00:22:10,040 --> 00:22:13,480 Speaker 1: bubble in a specific slice of the stock market. I'm 372 00:22:13,480 --> 00:22:17,280 Speaker 1: talking about utilities and reads and other interest rate sensitive sectors. 373 00:22:17,480 --> 00:22:21,520 Speaker 1: Ce CETA General has said that the world's largest stocks 374 00:22:21,520 --> 00:22:23,560 Speaker 1: that win from low yields are near their most expensive 375 00:22:23,600 --> 00:22:26,439 Speaker 1: relative to the losers in at least fifteen years. Do 376 00:22:26,480 --> 00:22:30,640 Speaker 1: you think that they are set for a big sell off? Well, 377 00:22:30,800 --> 00:22:34,200 Speaker 1: the dispersion of valuation is how you want to think 378 00:22:34,200 --> 00:22:38,199 Speaker 1: about that. That's the separation the spread between the uh 379 00:22:39,080 --> 00:22:42,239 Speaker 1: highest valued stocks versus lowest value stocks are as at 380 00:22:42,240 --> 00:22:47,360 Speaker 1: an extreme and that is typically associated with value stocks outperforming, 381 00:22:48,160 --> 00:22:51,480 Speaker 1: but economic growth in that modest level somewhere between zero 382 00:22:51,480 --> 00:22:54,840 Speaker 1: and three percent, not a recession. Nor you're having rapid expansion. 383 00:22:54,920 --> 00:22:57,560 Speaker 1: So that roughly the great rate of growth you've had 384 00:22:57,600 --> 00:23:00,240 Speaker 1: in the last ten years. That suggests that growth ocs 385 00:23:00,280 --> 00:23:02,280 Speaker 1: too better. So answer to your question, you think about 386 00:23:02,359 --> 00:23:05,240 Speaker 1: value versus growth, Value should do better based on some 387 00:23:05,320 --> 00:23:07,600 Speaker 1: of the metrics, growth likely to do better, and so 388 00:23:07,680 --> 00:23:10,200 Speaker 1: as a as an investor, but following managers should be 389 00:23:10,240 --> 00:23:12,760 Speaker 1: thinking about growth at a reasonable price kind of GARB 390 00:23:12,880 --> 00:23:15,720 Speaker 1: the proverbial GARB strategy, and the idea behind that and 391 00:23:15,840 --> 00:23:19,640 Speaker 1: intuition is not to own the most expensive companies, which 392 00:23:19,680 --> 00:23:21,679 Speaker 1: are in fact over valued. I would certainly concur with 393 00:23:21,720 --> 00:23:24,520 Speaker 1: that view um, but rather also you need always have 394 00:23:24,520 --> 00:23:28,199 Speaker 1: some growth because value stocks are likely to trail if 395 00:23:28,240 --> 00:23:30,280 Speaker 1: the economy continues to grow. So, hey, we call type 396 00:23:30,359 --> 00:23:33,280 Speaker 1: it increasingly the consensus cold its value worth of growth, 397 00:23:33,400 --> 00:23:36,360 Speaker 1: your growth of a value absolutely increasingly the consensus cold 398 00:23:36,440 --> 00:23:38,520 Speaker 1: is the rest of the world of the United States. 399 00:23:38,640 --> 00:23:41,679 Speaker 1: I don't hear that from you this morning. Why not? 400 00:23:41,920 --> 00:23:44,600 Speaker 1: Because the economic activity in the US is still very strong. 401 00:23:44,640 --> 00:23:47,480 Speaker 1: You've had two hundred sixty six thousand job print. Again, 402 00:23:47,520 --> 00:23:49,960 Speaker 1: that's obviously last month, but the idea of the EU 403 00:23:50,320 --> 00:23:54,720 Speaker 1: US economy continue to grow at north of two called 404 00:23:54,800 --> 00:23:58,119 Speaker 1: to a percent on average. The Golden Sacks Economics forecast 405 00:23:58,160 --> 00:24:01,040 Speaker 1: is certainly well above the can sensus consensus like one 406 00:24:01,320 --> 00:24:03,720 Speaker 1: eight percent or something like one point at two point three. 407 00:24:04,080 --> 00:24:06,840 Speaker 1: The idea of the way you make money is to 408 00:24:06,880 --> 00:24:10,480 Speaker 1: have a view that's different from consensus and have consensus 409 00:24:10,560 --> 00:24:12,840 Speaker 1: move towards you. Having a view in a lot of 410 00:24:12,840 --> 00:24:15,520 Speaker 1: consensus is gonna make you necessarily a whole lot of money. 411 00:24:15,680 --> 00:24:17,920 Speaker 1: The idea is to find the opportunity where there's a 412 00:24:18,000 --> 00:24:20,199 Speaker 1: there's a gap. What's your view on what the participation 413 00:24:20,240 --> 00:24:24,040 Speaker 1: has been through SMP five hundreds up around about. The 414 00:24:24,040 --> 00:24:26,000 Speaker 1: Wall Street Journal came out with a well read story 415 00:24:26,200 --> 00:24:27,800 Speaker 1: in the last couple of days about the amount of 416 00:24:27,800 --> 00:24:30,800 Speaker 1: outflows that we've actually seen from equity focus funds here 417 00:24:30,800 --> 00:24:33,520 Speaker 1: in the United States. Who's been buying, who's been participating. 418 00:24:33,640 --> 00:24:36,399 Speaker 1: So when we look at the major owners of the 419 00:24:36,480 --> 00:24:39,960 Speaker 1: U S stock market, we can look at households directly, 420 00:24:40,400 --> 00:24:44,879 Speaker 1: mutual funds indirectly, foreign investors, and pension funds. Those four 421 00:24:44,920 --> 00:24:48,359 Speaker 1: categories own around of the US stock market, and so 422 00:24:48,880 --> 00:24:51,960 Speaker 1: they both benefit to the extent that they're buying even 423 00:24:52,000 --> 00:24:54,440 Speaker 1: if they just own their positions and their positions right now, 424 00:24:54,640 --> 00:24:58,040 Speaker 1: they're around the eighty five percent of coincidentally, their own 425 00:24:58,640 --> 00:25:02,040 Speaker 1: most of the market, and they are also relative their 426 00:25:02,080 --> 00:25:04,720 Speaker 1: own historical allegations very very high, and that is a 427 00:25:04,720 --> 00:25:07,359 Speaker 1: result they've all benefited. And some good news for U 428 00:25:07,359 --> 00:25:10,399 Speaker 1: S equities this morning. US Chinese negotiators planning for a 429 00:25:10,440 --> 00:25:13,160 Speaker 1: delay of the December terrorists. That's according to Dow Jones. 430 00:25:13,200 --> 00:25:15,159 Speaker 1: So we do finally have a report. The silence over 431 00:25:15,200 --> 00:25:17,880 Speaker 1: the last couple of days has been absolutely definite, deafening. 432 00:25:18,119 --> 00:25:21,360 Speaker 1: No official report, I have to say, but the Dow 433 00:25:21,560 --> 00:25:25,080 Speaker 1: Jones reporting the US and Chinese trade negotiators allaying the 434 00:25:25,160 --> 00:25:27,200 Speaker 1: groundwork for a delay of a fresh round of tariffs 435 00:25:27,200 --> 00:25:29,840 Speaker 1: set to kick in on December fifteen. That's according to 436 00:25:29,880 --> 00:25:33,880 Speaker 1: officials from both sides. Lisa and Futures are race losses 437 00:25:34,040 --> 00:25:36,520 Speaker 1: earlier and are heading into the green ahead of the 438 00:25:36,640 --> 00:25:39,240 Speaker 1: US Open on the heels of that news. So spiking 439 00:25:39,320 --> 00:25:42,400 Speaker 1: upward I indirect response up four points on the SP 440 00:25:42,560 --> 00:25:44,919 Speaker 1: five hundred. David Coston a special thanks to you, sir Goldman, 441 00:25:44,960 --> 00:25:47,560 Speaker 1: Sex chief US equity strategist on the year ahead, and 442 00:25:47,600 --> 00:25:50,240 Speaker 1: slightly contrarian, I must say on some of those calls 443 00:25:50,240 --> 00:26:07,199 Speaker 1: as well. Great to see it, David. If you study 444 00:26:07,480 --> 00:26:10,800 Speaker 1: a Matt Winkler essay, he is the founder of Bloomberg News, 445 00:26:10,840 --> 00:26:13,480 Speaker 1: our former editor in chief, I should point out the 446 00:26:13,520 --> 00:26:16,000 Speaker 1: one that gave me that fancy badge and says Bloomberg 447 00:26:16,000 --> 00:26:20,040 Speaker 1: on it. If you study the methodology of Matt Winkler, 448 00:26:20,200 --> 00:26:26,159 Speaker 1: it is paragraph after paragraph of density of show, and 449 00:26:26,720 --> 00:26:30,480 Speaker 1: he does that on tariffs, on trade, on exports and 450 00:26:30,560 --> 00:26:33,879 Speaker 1: imports of the United States of America. And Matt, what 451 00:26:34,080 --> 00:26:37,440 Speaker 1: is so extraordinary about your new essay on all the 452 00:26:37,560 --> 00:26:41,639 Speaker 1: confusion of tariffs is smack dab in the middle. You 453 00:26:41,760 --> 00:26:44,480 Speaker 1: go back to nineteen sixty nine I was a few 454 00:26:44,560 --> 00:26:48,000 Speaker 1: years ago, and say that the five year average of 455 00:26:48,080 --> 00:26:53,800 Speaker 1: global exports has finally declined. That's the ultimate price of 456 00:26:53,920 --> 00:26:57,679 Speaker 1: this trade war, isn't it? It looks that way, tom Uh. 457 00:26:57,880 --> 00:27:03,399 Speaker 1: You know, you can't obviously be certain, but everything points 458 00:27:03,480 --> 00:27:09,120 Speaker 1: to a deterioration of not only global trade, but particularly 459 00:27:09,760 --> 00:27:14,399 Speaker 1: as it affects the US and US companies industry. You 460 00:27:14,520 --> 00:27:17,160 Speaker 1: do this the methodology, Maunt that you use with your 461 00:27:17,200 --> 00:27:20,560 Speaker 1: colleague chen Pei is to really dive into the data 462 00:27:21,160 --> 00:27:25,160 Speaker 1: and find what matters in the density of this important essay. 463 00:27:25,680 --> 00:27:29,159 Speaker 1: What was the thing that surprised you, Well, that was, 464 00:27:30,040 --> 00:27:33,760 Speaker 1: without a doubt the biggest that suddenly we're looking at 465 00:27:34,080 --> 00:27:38,080 Speaker 1: the end of what has been a very long trajectory 466 00:27:38,560 --> 00:27:43,399 Speaker 1: of greater trade, which has benefited the United States. And 467 00:27:44,080 --> 00:27:46,800 Speaker 1: one aspect of that is if you just look at 468 00:27:46,800 --> 00:27:49,800 Speaker 1: the five largest companies in the world, you know more 469 00:27:49,840 --> 00:27:55,240 Speaker 1: than of them are made in America. So trade has 470 00:27:55,359 --> 00:28:00,680 Speaker 1: been the elixir for corporate America for more than half 471 00:28:00,720 --> 00:28:05,560 Speaker 1: a century, and now we're reaching a turning point and 472 00:28:07,240 --> 00:28:12,359 Speaker 1: it's not encouraging for American business. So Tom, I am 473 00:28:12,720 --> 00:28:15,320 Speaker 1: you mentioned them Matt's column. I'm reading it's probably twenty 474 00:28:15,400 --> 00:28:19,639 Speaker 1: years so paragraphs. Every single paragraph has at least one number. 475 00:28:19,840 --> 00:28:23,440 Speaker 1: So it's a winkler that come out heritage. You haven't 476 00:28:23,480 --> 00:28:27,200 Speaker 1: read the Bloomberg Way, Paul Sweeney let assignment this weekend. Boy, 477 00:28:27,200 --> 00:28:29,480 Speaker 1: if I'm a cub reporter, you know at Bloomberg News, 478 00:28:29,560 --> 00:28:31,560 Speaker 1: I got my work cut out for me. But so, Matt, 479 00:28:31,720 --> 00:28:35,240 Speaker 1: my simple question is it's globalization dead or it is 480 00:28:35,359 --> 00:28:37,680 Speaker 1: just just a blip in the road, And what is 481 00:28:37,760 --> 00:28:42,680 Speaker 1: a global trend? Okay, so China, by the way, continues 482 00:28:42,800 --> 00:28:46,840 Speaker 1: to export. And the five year rolling average for China 483 00:28:47,840 --> 00:28:50,600 Speaker 1: is very different from the US. The US has leveled off, 484 00:28:50,720 --> 00:28:55,800 Speaker 1: it's unchanged UM, whereas China is increased. UH. That suggests 485 00:28:55,920 --> 00:28:58,920 Speaker 1: that trade goes on with or without the United States, 486 00:28:59,240 --> 00:29:03,440 Speaker 1: and it also suggests that relationships with trade are going 487 00:29:03,480 --> 00:29:06,760 Speaker 1: to change, but that global trade will continue. It's just 488 00:29:06,920 --> 00:29:08,840 Speaker 1: that the US won't be the leader that it has 489 00:29:08,920 --> 00:29:13,320 Speaker 1: been UH for much of you know, the past seventy 490 00:29:13,400 --> 00:29:17,040 Speaker 1: five years. So, I mean, we have been a leader, 491 00:29:17,160 --> 00:29:19,960 Speaker 1: you know, since the end of World War Two, and 492 00:29:20,160 --> 00:29:21,640 Speaker 1: I can't imagine that we're not going to be a 493 00:29:21,720 --> 00:29:24,600 Speaker 1: leader going forward despite what we're seeing right now. What's 494 00:29:24,680 --> 00:29:28,080 Speaker 1: the what's the risk to our economy? UM, if we 495 00:29:28,160 --> 00:29:31,440 Speaker 1: are not in fact a leader. So you're seeing that 496 00:29:31,680 --> 00:29:35,400 Speaker 1: in a decline in business investment. For one thing is 497 00:29:35,520 --> 00:29:41,200 Speaker 1: that the chaos that is created by these tariffs has 498 00:29:41,320 --> 00:29:45,760 Speaker 1: essentially paralyzed Corporate America and ceo s are not committing 499 00:29:45,800 --> 00:29:49,960 Speaker 1: themselves to new plants and equipment in the US. UM. 500 00:29:50,480 --> 00:29:53,480 Speaker 1: Farmers we don't really have to talk much about because 501 00:29:53,520 --> 00:29:57,480 Speaker 1: it's obvious that they're in a perilous state because of 502 00:29:57,800 --> 00:30:01,200 Speaker 1: the those cash payments aren't helping. Well, they're helping to 503 00:30:01,320 --> 00:30:04,080 Speaker 1: some extent, but that's a version of chrony capitalism. Really, 504 00:30:04,200 --> 00:30:07,600 Speaker 1: that's not what farmers want, um, you know, the Trump 505 00:30:11,800 --> 00:30:18,520 Speaker 1: gentleman farmer, you know. And bilateral deals go only so far, um. 506 00:30:18,880 --> 00:30:22,400 Speaker 1: You know, when you're up against say, the EU, which is, 507 00:30:23,080 --> 00:30:27,800 Speaker 1: as you know, more than two dozen countries, UH, that 508 00:30:28,160 --> 00:30:33,480 Speaker 1: that's not an easy negotiating UH position to be in 509 00:30:33,720 --> 00:30:40,680 Speaker 1: because the EU UH is going to be obviously multilateral, 510 00:30:40,800 --> 00:30:43,400 Speaker 1: and the US can't negotiate with any of those countries 511 00:30:43,480 --> 00:30:45,200 Speaker 1: one by one, has to do it with all of them, 512 00:30:45,240 --> 00:30:47,600 Speaker 1: and that's not going to be easy. One final question, 513 00:30:47,840 --> 00:30:51,120 Speaker 1: this is just so important. There's an understanding Republicans and 514 00:30:51,200 --> 00:30:55,920 Speaker 1: Democrats are essentially on the same pray page on unfree trade. 515 00:30:56,560 --> 00:30:59,960 Speaker 1: Do you see in your study any window to get 516 00:31:00,120 --> 00:31:04,640 Speaker 1: us back to a multilateral US approach? Or do we 517 00:31:04,720 --> 00:31:08,600 Speaker 1: are we cornered by two parties that to stay elected, 518 00:31:08,880 --> 00:31:13,000 Speaker 1: given the popularity the spirit of UN free trade, they've 519 00:31:13,000 --> 00:31:16,640 Speaker 1: got to go in that direction or can we reverse that? Well, 520 00:31:16,720 --> 00:31:21,200 Speaker 1: if the pain UH is great enough, and it may 521 00:31:21,280 --> 00:31:26,000 Speaker 1: be UH in the years ahead for American business, the 522 00:31:26,160 --> 00:31:31,000 Speaker 1: politics could shift right now You're absolutely right. The politics 523 00:31:31,120 --> 00:31:35,040 Speaker 1: have gone and eighty degrees from where they were ten 524 00:31:35,120 --> 00:31:39,440 Speaker 1: years ago. Okay, let's leave it there. Matthew Winkler, congratulations 525 00:31:39,520 --> 00:31:42,720 Speaker 1: on an exceptionally important essay. This is a essay, folks 526 00:31:43,240 --> 00:31:47,880 Speaker 1: that you read paragraph to paragraph on the dynamics of trade, 527 00:31:47,920 --> 00:31:50,640 Speaker 1: and I should point out at Bloomberg Opinion and it 528 00:31:50,760 --> 00:31:53,640 Speaker 1: dovetails nicely with my chart of the year, which is 529 00:31:53,680 --> 00:31:57,840 Speaker 1: the income and custom tariffs into the United States, which 530 00:31:57,840 --> 00:32:02,400 Speaker 1: shows that this is a extrainary six standard deviation move 531 00:32:02,480 --> 00:32:05,800 Speaker 1: and I can't tell you how uncommon that is in 532 00:32:05,840 --> 00:32:11,360 Speaker 1: Bloomberg Opinion. Uh, Matt Winkler writing on Tariff's Paul. Thanks Tom. 533 00:32:11,720 --> 00:32:14,160 Speaker 1: You know, let's get a little us quite a morning 534 00:32:14,240 --> 00:32:16,680 Speaker 1: this morning with the impeachment. We had the announcement of 535 00:32:16,800 --> 00:32:20,160 Speaker 1: the two articles of impeachment this morning from uh Democratic 536 00:32:20,160 --> 00:32:23,560 Speaker 1: congressional leadership. Let's get some additional analysis. We welcome Emily Wilkins, 537 00:32:23,760 --> 00:32:27,000 Speaker 1: Bloomberg Government congressional reporter. Emily, thanks so much for joining us. 538 00:32:27,040 --> 00:32:30,600 Speaker 1: What were your key takeaways this morning? So the key 539 00:32:30,680 --> 00:32:33,480 Speaker 1: takeaways is that they have finally announced that we are 540 00:32:33,520 --> 00:32:35,840 Speaker 1: going to be seen two articles of impeachment and they 541 00:32:35,880 --> 00:32:39,440 Speaker 1: will be abuse of power and obstruction of Congress. UH. 542 00:32:39,560 --> 00:32:43,320 Speaker 1: Chairman Jerry Nadler of the Judiciary Committee also mentioned today 543 00:32:43,600 --> 00:32:46,200 Speaker 1: that he is planning on having the Committee vote on 544 00:32:46,280 --> 00:32:49,480 Speaker 1: the articles of impeachment that potentially tease us up for 545 00:32:49,640 --> 00:32:53,640 Speaker 1: a vote next week to impeach President Donald Trump. So 546 00:32:53,760 --> 00:32:56,880 Speaker 1: emily timing, so you think we will get an actual 547 00:32:57,080 --> 00:33:01,960 Speaker 1: vote next week on the House floor. Nothing has been 548 00:33:02,080 --> 00:33:05,160 Speaker 1: officially announced yet, but there is a thought that they 549 00:33:05,280 --> 00:33:08,320 Speaker 1: do want to get this done before December twentieth, that's 550 00:33:08,400 --> 00:33:11,320 Speaker 1: the last day of session for the year. If they 551 00:33:11,360 --> 00:33:13,080 Speaker 1: do get it done, it then kicks over to the 552 00:33:13,200 --> 00:33:16,200 Speaker 1: Senate or the Senate trial. Emily, just following up on that. 553 00:33:16,280 --> 00:33:18,240 Speaker 1: So we're gonna get a vote potentially in the House 554 00:33:18,400 --> 00:33:21,960 Speaker 1: next week. Give us the timing that is expected from 555 00:33:22,160 --> 00:33:27,240 Speaker 1: the Senate. Sure, So the Senate recently released the calendar, 556 00:33:27,360 --> 00:33:30,640 Speaker 1: and the entire month of January is gone. They're expecting 557 00:33:30,720 --> 00:33:33,479 Speaker 1: to use all of that month for this trial. Uh, 558 00:33:33,560 --> 00:33:37,280 Speaker 1: it could potentially go into February as well. Um, but 559 00:33:37,560 --> 00:33:40,320 Speaker 1: it sounds like it probably will be wrapped up near 560 00:33:40,520 --> 00:33:43,160 Speaker 1: sort of the first quarter of next year. Do we 561 00:33:43,280 --> 00:33:45,840 Speaker 1: know what a trial looks like? I mean, I have 562 00:33:45,920 --> 00:33:49,760 Speaker 1: a recollection of the Clinton trial in that, But do 563 00:33:49,840 --> 00:33:53,000 Speaker 1: you have a visual of what the quote unquote trial 564 00:33:53,120 --> 00:33:56,040 Speaker 1: would look like? Sure, I mean it's going to be 565 00:33:56,280 --> 00:33:59,840 Speaker 1: very interesting. You're going to see all in the Senate 566 00:34:00,040 --> 00:34:02,560 Speaker 1: sitting in there dust, not saying a word. They are 567 00:34:02,600 --> 00:34:04,920 Speaker 1: the jurors in this process, and so they are the 568 00:34:04,960 --> 00:34:07,640 Speaker 1: ones who are listening to the argument from either side 569 00:34:08,000 --> 00:34:11,040 Speaker 1: and trying to decide whether or not they're going to vote. 570 00:34:12,160 --> 00:34:14,279 Speaker 1: We gotta drag you back because there's a lot to 571 00:34:14,360 --> 00:34:17,360 Speaker 1: talk about here, to inform the public, including myself, and 572 00:34:17,520 --> 00:34:20,640 Speaker 1: really what we're in for, knowing that each impeachment is 573 00:34:20,719 --> 00:34:24,840 Speaker 1: its original character. Emily, Thank you so much, Emily Wilkins, 574 00:34:25,200 --> 00:34:30,960 Speaker 1: Bloomberg Government. Thanks for listening to the Bloomberg Surveillance podcast. 575 00:34:31,360 --> 00:34:36,279 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 576 00:34:36,440 --> 00:34:40,719 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 577 00:34:40,880 --> 00:34:44,680 Speaker 1: Keane before the podcast. You can always catch us worldwide. 578 00:34:45,200 --> 00:34:46,239 Speaker 1: I'm Bloomberg Radio.