Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane Jaily.
Speaker 1: We bring you insight from the best in economics, finance,
Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Let's
Speaker 1: Turn to Market. Seem A Shaw with us in London here,
Speaker 1: the chief strategists for the Principal Global Investors Group, sure
Speaker 1: that she could be with us. I love your note
Speaker 1: because it's short and right to the point. And Seema,
Speaker 1: you have some wonderful phrases that I need you to
Speaker 1: explain to our audience across America and worldwide. I love
Speaker 1: the idea of the vertico of equities. This is at
Speaker 1: Alfred Hitchcock. Is it? What is equity vertico for next year?
Speaker 1: So what it means, Tom, is we're expecting equity to
Speaker 1: continue to rise next year, really inflated by central bank easing,
Speaker 1: not really inflated by very strong economics. And as they
Speaker 1: continue to rise and those valuations become more and more
Speaker 1: expensive and disconnected from weak economics, it means that you're
Speaker 1: going to get to the point where investors are getting
Speaker 1: increasingly scared of the heights of equities. Now that's not
Speaker 1: mean to say that we expect an ectingmarket correction next year,
Speaker 1: but we are certainly getting closer with that vertigo and
Speaker 1: people start to feel a bit sick. Is it a bubble?
Speaker 1: Is it? By definition? I think of Steve Roach, the
Speaker 1: legend from Morgan Stanley now Yale, or even chairman Bernankey.
Speaker 1: You know, I hate this phrase when it works here
Speaker 1: are is it on the edge of bubble territory? I
Speaker 1: think there's a fair number of people who would say that.
Speaker 1: I would say, however, that you have got the prospect
Speaker 1: of economics catching up, So it's not a done deal
Speaker 1: that the bubble will continue to inflate, inflate, inflate, but
Speaker 1: you could get economis catching up with it. But at
Speaker 1: this stage certainly valuations are very expected, but they will
Speaker 1: be continue to be supported by central banks. So I
Speaker 1: want to go someplace else. Is the shift international? Is
Speaker 1: the shift to stay with us big cap? Something work
Speaker 1: this year? Is it a year of stick with what works?
Speaker 1: Or is it a year of shifting to new ideas?
Speaker 1: So it's a little bit of both. You stick with
Speaker 1: some of the stuff that has worked really well, such
Speaker 1: as megacaps. As you said, some of the defensive areas
Speaker 1: like real estate, we also continue to like. But also
Speaker 1: as we go into next year, there's going to be
Speaker 1: increasing opportunities, which will be important because investors need to
Speaker 1: have a stake in the upside, which we do think
Speaker 1: there will be opportunities for I look at the rest
Speaker 1: of your note and and again, what's so great about
Speaker 1: it is it's really brief. But you talk about risk velocity,
Speaker 1: you talk about I guess what is this a quickening
Speaker 1: of risk? Yeah? What is? You know? We we tend
Speaker 1: to look talk about the number of risks out there,
Speaker 1: but we never think about how quickly it transitions to portfolios.
Speaker 1: So that's what we're expecting next year. There's a number
Speaker 1: of different factors, but at least from this perspective, governments
Speaker 1: and political interference and a number of things we've been
Speaker 1: seen increasing over the next two last two years, and
Speaker 1: we expect that to continue as governments take a larger
Speaker 1: role than central banks have. And then you see a
Speaker 1: lot of the risks, she's a trade war. Eventually transitioning
Speaker 1: to the portfolio is very quickly. Seema lease over here
Speaker 1: in New York and one thing when we're talking about bubbles,
Speaker 1: I have to say it's not all stocks, because there
Speaker 1: have been certain stocks that have been beaten up, the
Speaker 1: stocks that resemble bonds or do best when bonds are rallying. Uh.
Speaker 1: Some people are concerned that the valuations there have gotten
Speaker 1: incredibly inflated. I'm talking about utilities or real estate investment trust.
Speaker 1: How concerned are you about a massive dried out, a
Speaker 1: massive sell off in those particular stocks. I mean, I
Speaker 1: think it is a concern. And I think that as
Speaker 1: we see those valuations that disconnect between some which extremely overvalid,
Speaker 1: which is some which are relatively cheap by history. If
Speaker 1: you do get that very technical shift, you could see
Speaker 1: a very very sharp move. So was that risk velocity
Speaker 1: coming through very sharply? And a number of the areas
Speaker 1: that have performed extremely well, and you've named a couple
Speaker 1: of theres such as utilities, Sama, I'm just wondering who's
Speaker 1: participated in this particular rolley this year. The Wall Street
Speaker 1: Journal out with a fascinating article yesterday referring to some
Speaker 1: data from Refinitive lip A that said investors have pulled
Speaker 1: one hundred and thirty five point five billion dollars from
Speaker 1: US stop focused mutual funds and etf so far this year,
Speaker 1: the biggest withdrawals on record Seema, who's been in the
Speaker 1: market to take advantage of this. You know, when we
Speaker 1: talked to investors, actually, even looking back to the first
Speaker 1: quarter of this year, when there were still a lot
Speaker 1: of concerns, the first question we would get from investors
Speaker 1: was when can I put my money back to work?
Speaker 1: They were desperate, So as soon as there were any
Speaker 1: indications to come in, that's when people started plowing in.
Speaker 1: And we've seen movement from from from hedge hedge funds.
Speaker 1: There's been a lot of the momentum trading and a
Speaker 1: lot of the e t f s as well, playing
Speaker 1: on this on this game, well, this is a really
Speaker 1: important idea. Though Cliff first quarted in zero Head yesterday
Speaker 1: it was brilliant about the cliche there's money on the sidelines?
Speaker 1: Is there money towards to shreds? Is there money on
Speaker 1: the sidelines? I think there is. You know, from our perspective,
Speaker 1: as long as you don't see a recession on the horizon,
Speaker 1: you should be invested in risk assets. Of course, you
Speaker 1: should protect on you on the downside and the defensive
Speaker 1: space and That's exactly why defensive especially equities, have performed
Speaker 1: so well this year is that people want to put
Speaker 1: their money to work. Now, there were some who didn't
Speaker 1: get back in on the rally at the beginning of
Speaker 1: the year when equities really bottomed um, and so for
Speaker 1: those people, they didn't put it in cash, but they
Speaker 1: just waited desperate to put it back into work. They're desperate.
Speaker 1: I mean, did you sense that desperation right now? I mean,
Speaker 1: we're up twenty. I haven't even looked John, I've been
Speaker 1: so busy over here. Arsenal last night against west Ham,
Speaker 1: Oh mg, that was exciting. Did you watch that gang?
Speaker 1: I watched it. I went to it. The SP five
Speaker 1: so far this year, and you're telling me people are
Speaker 1: dying on the sidelines to get in. Well, not necessarily equities,
Speaker 1: because as you said, they are extremely overvalued, but there
Speaker 1: are you know, people want to get something for their money.
Speaker 1: Where am I going to get that something? That's the
Speaker 1: money question? Yeah, absolutely. So. The couple, the couple of
Speaker 1: areas that we really like for next year is emerging
Speaker 1: market debt. Now that hasn't performed as well as the
Speaker 1: rest of the equity space or the fixed income space,
Speaker 1: and we think that the macro fundamentals for next year
Speaker 1: do look pretty good. The same thing with stuff like
Speaker 1: prefer securities, cocos, they are looking really good. They have
Speaker 1: the banking sect has been beaten up in a number
Speaker 1: of possible well, but they are protected by government, so
Speaker 1: that's another upside. But we also really like some of
Speaker 1: the liquid assets, specifically private real estate. Sema, thank you
Speaker 1: so much, Semach just wonderful. Well, really I love it.
Speaker 1: I get these fifty page two thousand twenty things. It's
Speaker 1: got time to read that, Thank you so much. With
Speaker 1: Principal Global Investors, five themes that will shape the markets.
Speaker 1: And now the most frustrating rest we have in all
Speaker 1: of Lubrick surveillance because when the journalist John Fenby walks
Speaker 1: in the door with his prolific writing, you don't know
Speaker 1: what to talk about. Should we talk about France and
Speaker 1: its classic one volume on France? Should we talk about
Speaker 1: his new effort Crucible about coming out of World War Two?
Speaker 1: Or the new edition of your classic Penguin book on China?
Speaker 1: Lisa Bramwitt said, go there. So that's what we're gonna do.
Speaker 1: On China. We have a president gy is it a
Speaker 1: fallback to Mao. Is the new leadership of China a
Speaker 1: redux of Mao? It's not a redux to Mao in
Speaker 1: terms of ideology and so on. He still believes in
Speaker 1: the reforms, the economic reforms, post things, things shaping, but
Speaker 1: he believes in the kind of power and the power
Speaker 1: centralization which we had on the Mao. So it's it's
Speaker 1: a term in terms of how China is run from
Speaker 1: the very top, but not necessarily in all the details
Speaker 1: of how it's run. There are three or four people
Speaker 1: that had the courage to write on all of China,
Speaker 1: like you have of course the giant Jonathan Spence, and
Speaker 1: and you Mr Fenby as well. Within writing on China
Speaker 1: is the response of the restaurant world. How do you
Speaker 1: synthesize President Trump's response to China? His China to his
Speaker 1: It's very erratic, i'd say, is the phrase, what we
Speaker 1: don't have from the United States is a coherent policy
Speaker 1: towards China, whereas She jinping is pretty coherent. I'm not
Speaker 1: a great fan for the idea that China always sets
Speaker 1: things in very very long term planning, but they are
Speaker 1: doing that Visa v. Trump at the moment and the
Speaker 1: clearest memories of being in Hong Kong with Governor Cheng
Speaker 1: the day the w t O began to splinter apart.
Speaker 1: Now we're really talking about the end of that multilateral experiment.
Speaker 1: How critical is it that we see how crucial is
Speaker 1: it rather that we see the w t O drift away? Well,
Speaker 1: China likes likes the w t O, and the danger
Speaker 1: if you get into a series of bilateral arrangements on
Speaker 1: trade rather than having an overarching organization like the w
Speaker 1: t O is that China will make an awful lot
Speaker 1: of deals around the world using its economic cloud quite
Speaker 1: nakedly to gain political influence. Jonathan, giving your vast experience
Speaker 1: in China and with China, i'd love your perspective on
Speaker 1: a question that Jonathan Faro has been asking all morning,
Speaker 1: which is a really good question. Is the silence that
Speaker 1: we've been hearing around the December fifteen tariffs a good
Speaker 1: thing or a bad thing in terms of them actually
Speaker 1: reaching some sort of accord. It shows I think that
Speaker 1: they are down to very serious negotiation at the moment.
Speaker 1: This is less the negotiation by tweet and silence from
Speaker 1: the Chinese side, and it's more a sign that they
Speaker 1: are getting down to real nitty gritty elements here, and
Speaker 1: that involves, of course increased Chinese purchases of American goods,
Speaker 1: particularly agriculture, but also it will require some indication from
Speaker 1: the U S side that they're willing to consider tariff
Speaker 1: rollbacks or further delays in tariffs to keep the Chinese happy.
Speaker 1: Another big question sort of overhang all of these negotiations
Speaker 1: is who has more to lose? And there was data
Speaker 1: coming out overnight about China's consumer inflation accelerating to a
Speaker 1: seven year high in November. This largely rides in the
Speaker 1: back of higher pork prices, but you see factory prices declining.
Speaker 1: This raises the specter of stagflation, of a concern for
Speaker 1: the PBOC what they are going to do in order
Speaker 1: to juic growth without causing a sort of hyper inflation
Speaker 1: that that impedes the economy. How should we view this?
Speaker 1: How concerned is the PBOC at this point? It is
Speaker 1: pretty concerned, I think, and it's traditional transition mechanisms aren't
Speaker 1: working as well as they used to, and you have
Speaker 1: a leadership in Beijing which doesn't want to go for
Speaker 1: the old fashioned stop go big stimulus packages that we've
Speaker 1: seen since two thousand and eight. They want a more managed,
Speaker 1: more stable economy, and they're trying to do this in
Speaker 1: the middle of the trade war, and that's difficult, and
Speaker 1: we can't let you go without a discussion. A crucible,
Speaker 1: You're right, prolifically, Jonathan Fenby. Crucible is about a time.
Speaker 1: It seems so important right now. Is it the end
Speaker 1: of World War two? It's the end of World War two?
Speaker 1: And it's the really the emergence of the new World system,
Speaker 1: both through the US involvement in the world and lots
Speaker 1: and lots of other things happening all across the globe.
Speaker 1: What's the distinction there? I mean, I think of the
Speaker 1: starvation in Europe, those difficult years of literally famine before
Speaker 1: the Marshall Plan, is well, did the US get that right?
Speaker 1: And can we get that spirit back? The US I
Speaker 1: think got that right. In fact, they were quite helped
Speaker 1: by the Soviet Union and the way that Starling got
Speaker 1: it wrong for most of the time. The US got
Speaker 1: it right through the Marshall Plan, through NATO, the establishment
Speaker 1: NATO and so on. And it needs that kind of
Speaker 1: commitment which you saw from the Truman administration to get
Speaker 1: things going again. I've got another two hours of questions
Speaker 1: another time, Jonathan Fanbi, thank you so much, folks. I'm
Speaker 1: going to cut to the chase. His one volume in
Speaker 1: China is absolutely definitive. It is a sprawling history, particularly
Speaker 1: of modern China. His one volume on France is just
Speaker 1: the single best thing out there, particularly on the cultural
Speaker 1: aspects of what make the French different and crucible thirteen
Speaker 1: months that forged our world with the emotion of awe
Speaker 1: after World War Two. It is always a joy to
Speaker 1: speak to Jean Claude Triche. There are too many things
Speaker 1: to talk about, including European central banking. Lisa Brando, It's
Speaker 1: would like a three hour interview. I guess we can't
Speaker 1: do that today, Lisa, but we will try forward with
Speaker 1: President Tryche on too many European topics. First, Sean Claude Triche,
Speaker 1: we must speak of the legacy of Paul Voker. We
Speaker 1: know of his courage in the late seventies in the
Speaker 1: early eighties to make tough decisions to force recession and
Speaker 1: to bring down inflation. But then there was a story
Speaker 1: afterward which was almost a study hand uh forward through
Speaker 1: the nineteen eighties, how does Europe find a vocer like
Speaker 1: presence for the next ten years. Well, let me let
Speaker 1: me say, Tom, how sad we are to lose Paul Vulcar.
Speaker 1: Until I would say his last days, he was still active.
Speaker 1: He was still very very keen on giving advice and sentiments.
Speaker 1: And the last book he published, Keeping Arid, has been
Speaker 1: absolutely incredible in terms of lessons to be learned from
Speaker 1: his whole life. He said the three verities are stable prices,
Speaker 1: sound finances, and good government. And he was not putting
Speaker 1: his punctions to say that on sound finance and good government.
Speaker 1: Practically all advanced economy where I'm not up to the
Speaker 1: challenges stable paces. We are still living in the legacy
Speaker 1: right as regards the stable prices, which which gives a
Speaker 1: measure of his own influence and his own achievement. You
Speaker 1: can't say enough about the book keeping out And of
Speaker 1: course this is Mr Foker writing with Bloomberg News. Is
Speaker 1: Christine Harper, great honor of Christine write that book with
Speaker 1: Chairman Walker in his final two years of life. Sean
Speaker 1: claud triche the new phrase. I know John Farrell wants
Speaker 1: to jump in here on it. Let me get the
Speaker 1: conversation started, how does Jean Claude Triche define fiscal space. Well,
Speaker 1: I would say a lot of countries have some fiscal
Speaker 1: space in the advanced to me, and should utilize their
Speaker 1: physical space as resolutely as possible with great determination in
Speaker 1: their interest and in the interest of the continental and
Speaker 1: global economies. Others are in a totally different situation. And
Speaker 1: that's all the difficulty with the concept of physical space
Speaker 1: at the global level as well as at the European level.
Speaker 1: There is a tendency to over simplify the recommendation and
Speaker 1: to say either you should be very sound and reasonable
Speaker 1: as regards the fiscal position, or you should be as
Speaker 1: expensive as possible. But it's not correct to simplify oversimplify
Speaker 1: the recommendation for for a number of countries like Germany
Speaker 1: and the Netherlands as examples, the idea that there should
Speaker 1: be much much I would say aggressive utilization of physical
Speaker 1: space is absolutely right and go without saying in my opinion,
Speaker 1: But others it's not the same. And I hesitate on
Speaker 1: the United States of America to tell you my my understanding,
Speaker 1: because the fiscal position is not signaling a lot of
Speaker 1: physical space in the US, at least in my view,
Speaker 1: Jean claud Le's trying and focus on europe An area
Speaker 1: that you had to oversee as the ECB president since
Speaker 1: twas and at three that was the last time that
Speaker 1: we had a Monechy policy review at the e c B.
Speaker 1: Christine Legard is now undertaking that task. What do you
Speaker 1: think needs to be done well? I think she's right
Speaker 1: to to look at it exactly like the FED looked
Speaker 1: at it in the very recent allions. Still continues if
Speaker 1: I'm not missled. So we we have a number of
Speaker 1: issues that are at stake. Which which are the judgments
Speaker 1: that you are i would say making on non conventional
Speaker 1: measures that have been so so heavily applied by all
Speaker 1: santo bags in the world. Is it something that you
Speaker 1: would consider permanent and structural or is it something which
Speaker 1: was really transitory, waiting for the economies of the advanced
Speaker 1: countries going back to normal themselves. Uh. You have also
Speaker 1: the way how do you run your definition of price stability?
Speaker 1: The United States Fed looked at it through a certain
Speaker 1: angle and concluding provisionally. To my knowledge, we don't change
Speaker 1: the definition of price stability to percent, but we are
Speaker 1: we will be more symmetric in utilizing this uh, this
Speaker 1: definition of price stability, So the same questions might be
Speaker 1: asked in Europe. My own understanding is that the most
Speaker 1: important one is certainly the definition of price stability and
Speaker 1: how do you run that? And I would personally, i
Speaker 1: would say, provisionally, conclude that a change of the figure
Speaker 1: would not be appropriate. Personally, at the time I was
Speaker 1: called myself to go to four percent instead of two percent,
Speaker 1: I don't think it was. It would have been a
Speaker 1: good idea, and today it would appear strange. I don't
Speaker 1: spouse the idea that zero percent or one percent would
Speaker 1: be better. It seems to me that we should not
Speaker 1: forget that the central banks are there to anchor medium
Speaker 1: and long term expectation. And that being said, it's clear
Speaker 1: to me that this running of monetary policy with this
Speaker 1: definition should be symmetric. Of course, I have no hesitation
Speaker 1: on that, but again I don't want to anticipate on
Speaker 1: the meditation of the Governing Council for our lessons to
Speaker 1: worldwide and placed decide that Johning us Humblinberg Radio, John Calatricia,
Speaker 1: the former President of the European Central Bank. Jean Claude,
Speaker 1: the former president of the e. C. B. The one
Speaker 1: that came after you are a Dragon used to say
Speaker 1: that for rights to be higher in the future, then
Speaker 1: needed to be lower. Now that's the argument for negative
Speaker 1: interest rates for much of the last five years or so.
Speaker 1: Do you think we need to reassess that argument? Well,
Speaker 1: again the problem. Of course, it is clear that extraordinary
Speaker 1: accommodating monetary policy, including negative interest rates like in Switzerland
Speaker 1: as minus zero points seven five, or in Sweden, or
Speaker 1: in in some respect in Japan or all this of
Speaker 1: course is extraordinary and associated with very very abnormally low
Speaker 1: level of inflation and also of growth in in the
Speaker 1: advanced economy. Uh. There are of course negatives that are
Speaker 1: associated with this negative interest rates or re accommodating policies
Speaker 1: as well as positives. But the positives, and I share
Speaker 1: the view of the major central banks that considered that
Speaker 1: the positives higher than the negatives. But the negatives should
Speaker 1: not be forgotten. And therefore I hope very much this
Speaker 1: very low it's will not be compulsory for eternity, and
Speaker 1: I hope and I expect that we will go back
Speaker 1: to a more normal situation. But that thing said, it
Speaker 1: is it is not an arbitrary decision of the central
Speaker 1: banks to embark on these accommitting in policies. It is
Speaker 1: because the situation is very demony. This has been wonderful,
Speaker 1: Jean clau Touche, thank you so much, particularly those thoughts
Speaker 1: on Paul Poker this morning. He is the former president
Speaker 1: of the European Central Bank. Please decide that joining us
Speaker 1: here in New York City is David coustin Government Sex Is,
Speaker 1: Chief US equity strategist. Good morning to you, Mr Corston,
Speaker 1: Good morning, optimistic about the year ahead. It give us
Speaker 1: the y. Why is the U S economy is continuing
Speaker 1: to grow and that is important because of the economic
Speaker 1: activity is what drives consumer spending. Consumers of US economy,
Speaker 1: that's what drive earnings, and that's what's likely to take
Speaker 1: the U S stock market higher in aboff average, in
Speaker 1: rising profit margins that will boost EPs by five percent.
Speaker 1: Where the rising profit margins coming from? Why are you
Speaker 1: looking for that type it? Well, the rising profit margins
Speaker 1: really is the fact that this year they came down
Speaker 1: by almost sixty five basis points. Kind of particular, But
Speaker 1: if you really want to look at what's happening, it's
Speaker 1: ultimately revenue growth. And revenue is the story. The unemployment
Speaker 1: right now is the lowest in fifty years, continuing to fall,
Speaker 1: likely driving overall business activity. Technology margins is what really
Speaker 1: distinguishes the United States equity markets from global markets, and
Speaker 1: the tech margins are now above and so in some
Speaker 1: cases you'll see them come down, but really coming down
Speaker 1: from a very very high levels compared with every whe
Speaker 1: else in the world. I know, Tom is over there
Speaker 1: in London. There's very low profit mars over there. Tom,
Speaker 1: you want to have more profit margins come here. Well,
Speaker 1: I will say that there is some concern about a
Speaker 1: bubble in a specific slice of the stock market. I'm
Speaker 1: talking about utilities and reads and other interest rate sensitive sectors.
Speaker 1: Ce CETA General has said that the world's largest stocks
Speaker 1: that win from low yields are near their most expensive
Speaker 1: relative to the losers in at least fifteen years. Do
Speaker 1: you think that they are set for a big sell off? Well,
Speaker 1: the dispersion of valuation is how you want to think
Speaker 1: about that. That's the separation the spread between the uh
Speaker 1: highest valued stocks versus lowest value stocks are as at
Speaker 1: an extreme and that is typically associated with value stocks outperforming,
Speaker 1: but economic growth in that modest level somewhere between zero
Speaker 1: and three percent, not a recession. Nor you're having rapid expansion.
Speaker 1: So that roughly the great rate of growth you've had
Speaker 1: in the last ten years. That suggests that growth ocs
Speaker 1: too better. So answer to your question, you think about
Speaker 1: value versus growth, Value should do better based on some
Speaker 1: of the metrics, growth likely to do better, and so
Speaker 1: as a as an investor, but following managers should be
Speaker 1: thinking about growth at a reasonable price kind of GARB
Speaker 1: the proverbial GARB strategy, and the idea behind that and
Speaker 1: intuition is not to own the most expensive companies, which
Speaker 1: are in fact over valued. I would certainly concur with
Speaker 1: that view um, but rather also you need always have
Speaker 1: some growth because value stocks are likely to trail if
Speaker 1: the economy continues to grow. So, hey, we call type
Speaker 1: it increasingly the consensus cold its value worth of growth,
Speaker 1: your growth of a value absolutely increasingly the consensus cold
Speaker 1: is the rest of the world of the United States.
Speaker 1: I don't hear that from you this morning. Why not?
Speaker 1: Because the economic activity in the US is still very strong.
Speaker 1: You've had two hundred sixty six thousand job print. Again,
Speaker 1: that's obviously last month, but the idea of the EU
Speaker 1: US economy continue to grow at north of two called
Speaker 1: to a percent on average. The Golden Sacks Economics forecast
Speaker 1: is certainly well above the can sensus consensus like one
Speaker 1: eight percent or something like one point at two point three.
Speaker 1: The idea of the way you make money is to
Speaker 1: have a view that's different from consensus and have consensus
Speaker 1: move towards you. Having a view in a lot of
Speaker 1: consensus is gonna make you necessarily a whole lot of money.
Speaker 1: The idea is to find the opportunity where there's a
Speaker 1: there's a gap. What's your view on what the participation
Speaker 1: has been through SMP five hundreds up around about. The
Speaker 1: Wall Street Journal came out with a well read story
Speaker 1: in the last couple of days about the amount of
Speaker 1: outflows that we've actually seen from equity focus funds here
Speaker 1: in the United States. Who's been buying, who's been participating.
Speaker 1: So when we look at the major owners of the
Speaker 1: U S stock market, we can look at households directly,
Speaker 1: mutual funds indirectly, foreign investors, and pension funds. Those four
Speaker 1: categories own around of the US stock market, and so
Speaker 1: they both benefit to the extent that they're buying even
Speaker 1: if they just own their positions and their positions right now,
Speaker 1: they're around the eighty five percent of coincidentally, their own
Speaker 1: most of the market, and they are also relative their
Speaker 1: own historical allegations very very high, and that is a
Speaker 1: result they've all benefited. And some good news for U
Speaker 1: S equities this morning. US Chinese negotiators planning for a
Speaker 1: delay of the December terrorists. That's according to Dow Jones.
Speaker 1: So we do finally have a report. The silence over
Speaker 1: the last couple of days has been absolutely definite, deafening.
Speaker 1: No official report, I have to say, but the Dow
Speaker 1: Jones reporting the US and Chinese trade negotiators allaying the
Speaker 1: groundwork for a delay of a fresh round of tariffs
Speaker 1: set to kick in on December fifteen. That's according to
Speaker 1: officials from both sides. Lisa and Futures are race losses
Speaker 1: earlier and are heading into the green ahead of the
Speaker 1: US Open on the heels of that news. So spiking
Speaker 1: upward I indirect response up four points on the SP
Speaker 1: five hundred. David Coston a special thanks to you, sir Goldman,
Speaker 1: Sex chief US equity strategist on the year ahead, and
Speaker 1: slightly contrarian, I must say on some of those calls
Speaker 1: as well. Great to see it, David. If you study
Speaker 1: a Matt Winkler essay, he is the founder of Bloomberg News,
Speaker 1: our former editor in chief, I should point out the
Speaker 1: one that gave me that fancy badge and says Bloomberg
Speaker 1: on it. If you study the methodology of Matt Winkler,
Speaker 1: it is paragraph after paragraph of density of show, and
Speaker 1: he does that on tariffs, on trade, on exports and
Speaker 1: imports of the United States of America. And Matt, what
Speaker 1: is so extraordinary about your new essay on all the
Speaker 1: confusion of tariffs is smack dab in the middle. You
Speaker 1: go back to nineteen sixty nine I was a few
Speaker 1: years ago, and say that the five year average of
Speaker 1: global exports has finally declined. That's the ultimate price of
Speaker 1: this trade war, isn't it? It looks that way, tom Uh.
Speaker 1: You know, you can't obviously be certain, but everything points
Speaker 1: to a deterioration of not only global trade, but particularly
Speaker 1: as it affects the US and US companies industry. You
Speaker 1: do this the methodology, Maunt that you use with your
Speaker 1: colleague chen Pei is to really dive into the data
Speaker 1: and find what matters in the density of this important essay.
Speaker 1: What was the thing that surprised you, Well, that was,
Speaker 1: without a doubt the biggest that suddenly we're looking at
Speaker 1: the end of what has been a very long trajectory
Speaker 1: of greater trade, which has benefited the United States. And
Speaker 1: one aspect of that is if you just look at
Speaker 1: the five largest companies in the world, you know more
Speaker 1: than of them are made in America. So trade has
Speaker 1: been the elixir for corporate America for more than half
Speaker 1: a century, and now we're reaching a turning point and
Speaker 1: it's not encouraging for American business. So Tom, I am
Speaker 1: you mentioned them Matt's column. I'm reading it's probably twenty
Speaker 1: years so paragraphs. Every single paragraph has at least one number.
Speaker 1: So it's a winkler that come out heritage. You haven't
Speaker 1: read the Bloomberg Way, Paul Sweeney let assignment this weekend. Boy,
Speaker 1: if I'm a cub reporter, you know at Bloomberg News,
Speaker 1: I got my work cut out for me. But so, Matt,
Speaker 1: my simple question is it's globalization dead or it is
Speaker 1: just just a blip in the road, And what is
Speaker 1: a global trend? Okay, so China, by the way, continues
Speaker 1: to export. And the five year rolling average for China
Speaker 1: is very different from the US. The US has leveled off,
Speaker 1: it's unchanged UM, whereas China is increased. UH. That suggests
Speaker 1: that trade goes on with or without the United States,
Speaker 1: and it also suggests that relationships with trade are going
Speaker 1: to change, but that global trade will continue. It's just
Speaker 1: that the US won't be the leader that it has
Speaker 1: been UH for much of you know, the past seventy
Speaker 1: five years. So, I mean, we have been a leader,
Speaker 1: you know, since the end of World War Two, and
Speaker 1: I can't imagine that we're not going to be a
Speaker 1: leader going forward despite what we're seeing right now. What's
Speaker 1: the what's the risk to our economy? UM, if we
Speaker 1: are not in fact a leader. So you're seeing that
Speaker 1: in a decline in business investment. For one thing is
Speaker 1: that the chaos that is created by these tariffs has
Speaker 1: essentially paralyzed Corporate America and ceo s are not committing
Speaker 1: themselves to new plants and equipment in the US. UM.
Speaker 1: Farmers we don't really have to talk much about because
Speaker 1: it's obvious that they're in a perilous state because of
Speaker 1: the those cash payments aren't helping. Well, they're helping to
Speaker 1: some extent, but that's a version of chrony capitalism. Really,
Speaker 1: that's not what farmers want, um, you know, the Trump
Speaker 1: gentleman farmer, you know. And bilateral deals go only so far, um.
Speaker 1: You know, when you're up against say, the EU, which is,
Speaker 1: as you know, more than two dozen countries, UH, that
Speaker 1: that's not an easy negotiating UH position to be in
Speaker 1: because the EU UH is going to be obviously multilateral,
Speaker 1: and the US can't negotiate with any of those countries
Speaker 1: one by one, has to do it with all of them,
Speaker 1: and that's not going to be easy. One final question,
Speaker 1: this is just so important. There's an understanding Republicans and
Speaker 1: Democrats are essentially on the same pray page on unfree trade.
Speaker 1: Do you see in your study any window to get
Speaker 1: us back to a multilateral US approach? Or do we
Speaker 1: are we cornered by two parties that to stay elected,
Speaker 1: given the popularity the spirit of UN free trade, they've
Speaker 1: got to go in that direction or can we reverse that? Well,
Speaker 1: if the pain UH is great enough, and it may
Speaker 1: be UH in the years ahead for American business, the
Speaker 1: politics could shift right now You're absolutely right. The politics
Speaker 1: have gone and eighty degrees from where they were ten
Speaker 1: years ago. Okay, let's leave it there. Matthew Winkler, congratulations
Speaker 1: on an exceptionally important essay. This is a essay, folks
Speaker 1: that you read paragraph to paragraph on the dynamics of trade,
Speaker 1: and I should point out at Bloomberg Opinion and it
Speaker 1: dovetails nicely with my chart of the year, which is
Speaker 1: the income and custom tariffs into the United States, which
Speaker 1: shows that this is a extrainary six standard deviation move
Speaker 1: and I can't tell you how uncommon that is in
Speaker 1: Bloomberg Opinion. Uh, Matt Winkler writing on Tariff's Paul. Thanks Tom.
Speaker 1: You know, let's get a little us quite a morning
Speaker 1: this morning with the impeachment. We had the announcement of
Speaker 1: the two articles of impeachment this morning from uh Democratic
Speaker 1: congressional leadership. Let's get some additional analysis. We welcome Emily Wilkins,
Speaker 1: Bloomberg Government congressional reporter. Emily, thanks so much for joining us.
Speaker 1: What were your key takeaways this morning? So the key
Speaker 1: takeaways is that they have finally announced that we are
Speaker 1: going to be seen two articles of impeachment and they
Speaker 1: will be abuse of power and obstruction of Congress. UH.
Speaker 1: Chairman Jerry Nadler of the Judiciary Committee also mentioned today
Speaker 1: that he is planning on having the Committee vote on
Speaker 1: the articles of impeachment that potentially tease us up for
Speaker 1: a vote next week to impeach President Donald Trump. So
Speaker 1: emily timing, so you think we will get an actual
Speaker 1: vote next week on the House floor. Nothing has been
Speaker 1: officially announced yet, but there is a thought that they
Speaker 1: do want to get this done before December twentieth, that's
Speaker 1: the last day of session for the year. If they
Speaker 1: do get it done, it then kicks over to the
Speaker 1: Senate or the Senate trial. Emily, just following up on that.
Speaker 1: So we're gonna get a vote potentially in the House
Speaker 1: next week. Give us the timing that is expected from
Speaker 1: the Senate. Sure, So the Senate recently released the calendar,
Speaker 1: and the entire month of January is gone. They're expecting
Speaker 1: to use all of that month for this trial. Uh,
Speaker 1: it could potentially go into February as well. Um, but
Speaker 1: it sounds like it probably will be wrapped up near
Speaker 1: sort of the first quarter of next year. Do we
Speaker 1: know what a trial looks like? I mean, I have
Speaker 1: a recollection of the Clinton trial in that, But do
Speaker 1: you have a visual of what the quote unquote trial
Speaker 1: would look like? Sure, I mean it's going to be
Speaker 1: very interesting. You're going to see all in the Senate
Speaker 1: sitting in there dust, not saying a word. They are
Speaker 1: the jurors in this process, and so they are the
Speaker 1: ones who are listening to the argument from either side
Speaker 1: and trying to decide whether or not they're going to vote.
Speaker 1: We gotta drag you back because there's a lot to
Speaker 1: talk about here, to inform the public, including myself, and
Speaker 1: really what we're in for, knowing that each impeachment is
Speaker 1: its original character. Emily, Thank you so much, Emily Wilkins,
Speaker 1: Bloomberg Government. Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom
Speaker 1: Keane before the podcast. You can always catch us worldwide.
Speaker 1: I'm Bloomberg Radio.