WEBVTT - Surveillance: Brexit Is A Stagflation Event, Weinberg Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.040 Bloomberg dot Com, and of course, on the Bloomberg I 0:00:34.080 --> 0:00:37.360 want to bring in Cal Wineberg, high Frequency Economics chief economist, 0:00:37.360 --> 0:00:38.879 and he joins us. Now, good day to you, Carl. 0:00:38.960 --> 0:00:41.360 Let's start with that theme. Isn't the year of the 0:00:41.400 --> 0:00:44.760 global synchronized slowdown? Hi, Good morning, Jonathan. It's kind of 0:00:44.760 --> 0:00:47.640 interesting me being over here and you're being over there. Um, 0:00:47.640 --> 0:00:51.320 we're looking at certainly slower growth in Europe. We're looking 0:00:51.360 --> 0:00:54.080 at slower growth in Canada. We heard about that last night. 0:00:54.360 --> 0:00:57.520 Japan is doing actually a little bit better. China's numbers 0:00:57.560 --> 0:01:01.160 domestically disappointing the trade numbers, though people are taking this 0:01:01.440 --> 0:01:04.880 one off number uh and projecting it into a slowdown. 0:01:04.959 --> 0:01:07.720 China's exports and imports are actually growing between ten and 0:01:07.720 --> 0:01:11.319 twenty percent faster than world trade. But that's the key theme, Jonathan. 0:01:11.400 --> 0:01:14.720 Let's talk about world trade. World trade in the third 0:01:14.800 --> 0:01:17.679 quarter slow to four point seven year over year growth 0:01:17.680 --> 0:01:21.000 of exports and that's just unacceptably slow. It's consistent with 0:01:21.040 --> 0:01:23.800 a slowing of the world economy, not a recession, but 0:01:23.920 --> 0:01:26.920 a slowdown, and it's certainly troubling. Well, let's talk about 0:01:26.920 --> 0:01:29.920 what's distorted and what is not. Quite clearly, last year 0:01:29.920 --> 0:01:32.240 we saw some front loading ahead of expected tariffs. What 0:01:32.319 --> 0:01:34.360 are we going to start to see some so called 0:01:34.360 --> 0:01:37.560 clean data from China. Well, you're never going to see 0:01:37.560 --> 0:01:39.800 clean data from China. You really want, you really want 0:01:39.800 --> 0:01:42.759 to look at the six month, three month, and twelve 0:01:42.800 --> 0:01:45.240 month moving averages when you look at exports and imports, 0:01:45.440 --> 0:01:48.920 and they've been remarkably steady. China's imports, which is how 0:01:48.960 --> 0:01:52.200 it really affects the rest of the world, up thirteen 0:01:52.280 --> 0:01:54.960 and a fraction percent year over year for the last 0:01:55.000 --> 0:01:57.640 five months. That's faster than world trade has been growing. 0:01:57.760 --> 0:02:00.040 China has been adding to the rate of growth of 0:02:00.120 --> 0:02:03.520 world trade, not subtracting from it on the export side, 0:02:03.560 --> 0:02:06.720 between ten and twenty year over year growth of exports 0:02:06.840 --> 0:02:10.400 all year. So China is not the problem. In fact 0:02:10.440 --> 0:02:12.880 that the US and growing in terms of its exports 0:02:12.919 --> 0:02:16.080 and imports also faster than world trade, and China one 0:02:16.160 --> 0:02:18.000 has to be really worried about the rest of the 0:02:18.000 --> 0:02:21.600 world where the slowdown must be substantial in order to 0:02:21.639 --> 0:02:24.120 generate these kinds of slow numbers for the world as 0:02:24.160 --> 0:02:26.760 a whole. Well, Euros and industrial production dates also came 0:02:26.800 --> 0:02:28.760 out this morning, and that was pretty ugly as well. 0:02:28.800 --> 0:02:30.960 I think the question for the US based investor at 0:02:30.960 --> 0:02:33.480 the moment, Carl, is to what extent, to what degree 0:02:33.960 --> 0:02:36.640 is the U S economy insulcted from everything that's happening 0:02:36.680 --> 0:02:39.679 worldwide at the moment. What's the answer to that, cal Well, 0:02:39.720 --> 0:02:42.040 the answer to that is that we're worried. Everybody from 0:02:42.080 --> 0:02:45.440 Fed officials to Wall Street economists are taking a look 0:02:45.440 --> 0:02:47.679 at the slowdown in the world economy and saying that's 0:02:47.919 --> 0:02:51.359 a threat to uh A, U S economic growth into 0:02:51.360 --> 0:02:54.680 world economic growth. So we're watching the slowdown in trade. 0:02:54.880 --> 0:02:58.120 The slowdown in oil prices is kind of ominous because 0:02:58.160 --> 0:02:59.760 it takes a big chunk of the world a part 0:02:59.760 --> 0:03:02.320 of the of their produces oil and exports it and 0:03:02.360 --> 0:03:06.359 reduces their export revenues, and that in the past has 0:03:06.560 --> 0:03:09.120 been a negative for world trade and for world growth, 0:03:09.400 --> 0:03:11.440 And of course a lot depends on how far it goes. 0:03:11.480 --> 0:03:13.680 There are some people who are looking at the indicators 0:03:13.720 --> 0:03:15.840 and saying, well, we should be looking for a bottom 0:03:15.880 --> 0:03:19.680 in Europe, I personally don't see it in indices like 0:03:19.960 --> 0:03:23.520 the European Economic Confidence Index, the IO index. Uh, you know, 0:03:23.520 --> 0:03:25.560 we're not seeing any sign of the bottom yet. But 0:03:25.600 --> 0:03:28.679 those indicries are at their current levels, pointing to a 0:03:28.840 --> 0:03:31.840 slow down in growth, not to a recession. Really really 0:03:31.840 --> 0:03:34.760 easy to paint a ugly picture of ugly global growth 0:03:35.280 --> 0:03:37.360 on a morning like this morning, especially in futures come 0:03:37.400 --> 0:03:39.600 again by round about twenty two points on the SMP 0:03:39.720 --> 0:03:41.560 five hundred off the back of that, A little bit 0:03:41.560 --> 0:03:43.800 more complex to identify where this shows up in the 0:03:43.840 --> 0:03:45.800 U S economy, Carl. If you just take a real 0:03:45.880 --> 0:03:47.800 time indicator of the health of the U. S economy 0:03:47.800 --> 0:03:50.480 and look at initial jobless claims that's still hanging in 0:03:50.480 --> 0:03:53.280 there around multi decade lows. If you had a dashboard 0:03:53.280 --> 0:03:55.640 of economic data points for the US right now, Carl, 0:03:56.080 --> 0:03:58.880 where would you be looking for this slow down worldwide 0:03:58.920 --> 0:04:02.240 to show up domestic? Like? Yeah, My colleague Jim O'Sullivan 0:04:02.480 --> 0:04:05.960 puzzles exactly this point in his recent edition of Daily 0:04:06.000 --> 0:04:09.160 Notes on the United States. You know, at high Frequency Economics, 0:04:09.160 --> 0:04:11.400 we're thinking that the US, the gloom about the U. S. 0:04:11.440 --> 0:04:14.680 Economy is probably a bit overstated, which doesn't mean it's 0:04:14.680 --> 0:04:16.640 not the vogue right now in the markets. But you 0:04:16.640 --> 0:04:18.280 look at the I s M is still pointing to 0:04:18.480 --> 0:04:21.279 very very healthy growth. You're looking at in weekly initial claims, 0:04:21.480 --> 0:04:25.120 there's no real sign of a problem in those data. Um, 0:04:25.160 --> 0:04:27.760 so the U. S. Economy seems to be moving along 0:04:27.839 --> 0:04:31.760 perhaps better than expecting. The linkage to the world probably 0:04:31.880 --> 0:04:36.039 isn't through trade as much as as itself, but rather 0:04:36.080 --> 0:04:38.760 through the fact that so many US companies, most US 0:04:38.800 --> 0:04:41.520 companies these days, including our own, do a lot of 0:04:41.520 --> 0:04:44.000 our business overseas and generating a lot of our profits 0:04:44.040 --> 0:04:46.360 from overseas, and that's where the tie into the equity 0:04:46.400 --> 0:04:49.400 markets is, I believe about yearnings on the SMP five 0:04:49.960 --> 0:04:52.800 coming from abroad, there's plenty of gloom out there this morning, 0:04:52.920 --> 0:04:55.360 the data, plenty of gloom in the politics as well. 0:04:55.400 --> 0:04:58.880 Our chief Brexit correspondent in the city of London this morning, 0:04:59.080 --> 0:05:02.760 Good morning to him. The cade just extraordinary, the Prime 0:05:02.800 --> 0:05:04.880 Minister I thought it was fascinating for those who we 0:05:04.960 --> 0:05:08.440 carried it fully on our global audience on Bloomberg Television. 0:05:09.200 --> 0:05:13.440 Really the Prime Minister John Up at Stoke on Trent 0:05:13.600 --> 0:05:17.680 in your neck of the woods, seventy voting for Brexit, 0:05:17.760 --> 0:05:21.120 to leave the EU, and she gave a very brave speech, 0:05:21.640 --> 0:05:25.000 you know, given the seven pm vote scheduled for tomorrow night, 0:05:25.360 --> 0:05:28.000 if the right audience tom because what is she trying 0:05:28.000 --> 0:05:30.040 to say now that there's more chance of that being 0:05:30.800 --> 0:05:34.120 no Brexit, the no deal, if this is impostable? Is 0:05:34.120 --> 0:05:36.560 Wolf getting mancho said it was wonderful to have him 0:05:36.600 --> 0:05:39.880 with us in the last hour. There's about five conversations 0:05:39.880 --> 0:05:43.600 going on here right now in Karl Weinberg of high 0:05:43.600 --> 0:05:48.120 frequency economics. You are expert at the conversational linking all 0:05:48.200 --> 0:05:52.159 this to the actual growth of a nation, the growth 0:05:52.200 --> 0:05:55.040 of the United Kingdom. Where is it, I mean, is 0:05:55.080 --> 0:05:58.719 it on the edge of recession? Well, at this point, 0:05:59.040 --> 0:06:01.320 there's not really a lot you can say about forecasting 0:06:01.320 --> 0:06:03.279 the UK economy because there are so many balls in 0:06:03.320 --> 0:06:05.760 the air. If there were no Brexit, if everything just 0:06:05.800 --> 0:06:08.440 occurred in a straight line there were in all this uncertainty, 0:06:08.640 --> 0:06:11.960 the UK economy still would probably be slowing down. We 0:06:12.000 --> 0:06:15.159 look at the domestic indicators, you know, credit growth is slowing, 0:06:15.400 --> 0:06:18.640 industrial production is down. Services doing a little bit better, 0:06:18.680 --> 0:06:21.080 but not too great. Construction is doing okay, but a 0:06:21.080 --> 0:06:24.239 lot of that might even be Brexit related. So um, 0:06:24.240 --> 0:06:26.520 what we are in the housing market, of course is down. 0:06:26.720 --> 0:06:29.039 So if everything, if nothing were to change, then the 0:06:29.080 --> 0:06:32.240 economy would probably be slowing down at least possibly turning 0:06:32.279 --> 0:06:34.880 a corner into recession. But then you add the uncertainty 0:06:34.880 --> 0:06:39.159 of Brexit, which in our analysis is a stag inflation event. 0:06:39.440 --> 0:06:42.280 It's going to generate a shortage of labor, which will 0:06:42.360 --> 0:06:45.279 raise wages, cause inflation, and at the same time reduce 0:06:45.320 --> 0:06:48.520 potential output in the UK. A herd Brexit means a 0:06:48.640 --> 0:06:51.560 very very hard downturn with a good chunk of inflation 0:06:52.160 --> 0:06:54.520 coming its way, possibly on the order of magnitude we 0:06:54.520 --> 0:07:00.800 haven't seen before. And you know, I guess the magnitude 0:07:00.839 --> 0:07:04.039 before is going to rely on this vote tomorrow night. 0:07:04.080 --> 0:07:07.760 I mean, this is vote economically critical. I don't buy 0:07:07.800 --> 0:07:11.000 that well. I think that it narrows the choices. If 0:07:11.000 --> 0:07:13.960 this deal is rejected, then we're really down to two choices, 0:07:14.240 --> 0:07:18.120 which is hard Brexit or no Brexit. I don't think 0:07:18.160 --> 0:07:20.880 that europe will return to the table to negotiate a deal, 0:07:21.120 --> 0:07:24.000 even in Parliament, a new deal, even if Parliament takes 0:07:24.000 --> 0:07:27.160 control of the process, and Um, I'm not so sure 0:07:27.200 --> 0:07:32.600 there's any politically attainable configuration within Parliament even if people 0:07:32.680 --> 0:07:36.160 cross benches, which I doubt they will, to do anything else. 0:07:36.160 --> 0:07:38.040 So I think it comes down to no Brexit, are 0:07:38.120 --> 0:07:41.000 heard Brexit, and I don't really know where which one 0:07:41.040 --> 0:07:43.720 of those two ways it's gonna get. Johnny, I'm fascinating 0:07:43.760 --> 0:07:46.240 your thoughts because in reading the papers this morning at 0:07:46.240 --> 0:07:52.280 my uh my breakfast at um McDonald's. Um, you know, 0:07:52.680 --> 0:07:56.720 reading the newspapers this morning, the Telegraph approach is that 0:07:57.400 --> 0:08:01.640 there can be a smoothness after the short uproar. John, 0:08:01.720 --> 0:08:05.080 you have lived this in the United Kingdom. Camp the 0:08:05.120 --> 0:08:10.760 United Kingdom solve its many trade dynamics in problems just 0:08:10.840 --> 0:08:14.480 by working things out item by item, you would hope. So, 0:08:14.520 --> 0:08:17.280 but how many items are there to work out? Eric 0:08:17.360 --> 0:08:21.760 Nielsen made adamant there's there's there's uncountable trade agreements. It 0:08:21.760 --> 0:08:24.400 would take it would take a long long time, and 0:08:24.440 --> 0:08:26.560 for what I've seen so far, they've barely started. And 0:08:26.560 --> 0:08:29.200 this is the problem. Tom. If there is a serious 0:08:29.200 --> 0:08:32.640 conversation about no deal, then what kind of preparations have 0:08:32.679 --> 0:08:35.360 been done at the government level, I'm not convinced that 0:08:35.480 --> 0:08:37.680 enough has been done so fast we go into this 0:08:37.760 --> 0:08:40.960 vote tomorrow. It's fascinating most people expected not to pass. 0:08:41.200 --> 0:08:43.320 I start gonna find anyone that thinks it will pass. 0:08:43.640 --> 0:08:45.920 And then the Prime Minister has three days to tell 0:08:46.000 --> 0:08:48.160 us what the plan be is and she telled us 0:08:48.520 --> 0:08:50.280 what over the last few months there is no plan 0:08:50.360 --> 0:08:53.160 be tom right, Carol Weinberg, thank you so much. With 0:08:53.240 --> 0:09:07.680 high frequency egos. Will the earning season here in the 0:09:07.720 --> 0:09:10.560 United States do anything to boost confidence? And it begins 0:09:10.600 --> 0:09:13.800 this quarter with City Group taken the spotlight, with fourth 0:09:13.840 --> 0:09:16.800 quarter results due a little bit later, followed by JP 0:09:16.920 --> 0:09:20.400 Morgan and at Wells Fargo coming up tomorrow. Joining us 0:09:20.400 --> 0:09:23.800 to discuss is Fred Cannon, KPW Global Director of Research, 0:09:23.840 --> 0:09:25.600 and he joined us here in New York. Good morning 0:09:25.640 --> 0:09:27.839 to Fred, Good morning Joanes. So what are we looking 0:09:27.880 --> 0:09:30.040 for from the big banks as they kick things off 0:09:30.040 --> 0:09:32.120 a little bit later? We're looking at him to be 0:09:32.240 --> 0:09:36.200 see if we can beat diminished expectations. I think it's 0:09:36.200 --> 0:09:38.360 a little bit regrettable that cities the first half because 0:09:38.360 --> 0:09:40.679 we're actually more cautious on City than JP Morgan and 0:09:40.720 --> 0:09:43.560 Wells and generally JP Morgan and Wells come first, but 0:09:43.720 --> 0:09:47.920 nonetheless it's really beating diminished expectations. So expectations in terms 0:09:47.960 --> 0:09:50.440 of the earnings have come in, but the banks have 0:09:50.559 --> 0:09:53.160 rallied into this as well, So it's kind of two 0:09:53.200 --> 0:09:55.320 different things going into the numbers. Is this a low 0:09:55.360 --> 0:09:57.840 bar or a high bar? What is it? It's a 0:09:57.880 --> 0:09:59.840 low bar, no doubt. I mean, yes, they've rallied a 0:10:00.120 --> 0:10:02.760 this year, but look at where they came from, move 0:10:02.840 --> 0:10:06.040 pretty much last year, and remember coming into the third quarter, 0:10:06.040 --> 0:10:08.840 I think there was the market was down so much. 0:10:08.920 --> 0:10:12.600 There's a lot of expectations diminishing, both on earning estimates 0:10:12.640 --> 0:10:16.320 as well as as performance. City warned early we do 0:10:16.400 --> 0:10:20.200 expect capital markets to be soft. Fred, what's and I 0:10:20.200 --> 0:10:22.839 give John Ferrell a ton of credit, folks for identifying 0:10:22.880 --> 0:10:26.160 the weak bank performance earlier this year. I mean, the 0:10:26.200 --> 0:10:28.600 depth of the bear market for JP Morgan was down 0:10:28.600 --> 0:10:31.520 twenty two percentage Right now, I'm gonna call it a 0:10:31.520 --> 0:10:36.280 negative off the summer two thousand and eighteen. Top What 0:10:36.640 --> 0:10:41.360 metric is most important? Is it a book value, balance 0:10:41.440 --> 0:10:44.840 sheet analysis or is it something on the income statement 0:10:45.120 --> 0:10:48.080 that matters to Fred Cannon? What matters to me is 0:10:48.080 --> 0:10:51.720 that we continue to see credit be solid, because that's 0:10:51.760 --> 0:10:54.800 really what the market was signaling during the fourth quarter was, Hey, 0:10:54.800 --> 0:10:57.800 we're worried about a recession. We're worried about the underwriting 0:10:57.800 --> 0:10:59.880 and the credit because that's what really could destroy the 0:11:00.040 --> 0:11:03.559 orward earning estimates. If credit remains solid, uh, and the 0:11:03.920 --> 0:11:06.480 balance sheets are strong, and we get a little bit 0:11:06.480 --> 0:11:08.520 of help like we expect from loan growth, we think 0:11:08.559 --> 0:11:13.199 we'll be Okay. How much patience is there in the underperformers, 0:11:13.280 --> 0:11:16.920 how much institutional Wall Street? We've been doing this for 0:11:17.000 --> 0:11:19.240 ten years, You've got to get it going. I don't 0:11:19.240 --> 0:11:21.680 mean Deutsche Bank, Commerce Bank. I mean in the US, 0:11:22.320 --> 0:11:26.480 the US underperformers, where we're just saying, let's go. Is 0:11:26.520 --> 0:11:29.680 that evident this time around? No, I don't think that 0:11:29.720 --> 0:11:32.360 there's that much uh. You know what I would call 0:11:32.440 --> 0:11:35.480 frustration with the with the big US banks and even 0:11:35.520 --> 0:11:39.280 the underperformers. Clearly there's been frustration with Wells Fargo UM. 0:11:39.360 --> 0:11:41.760 But as we look forward, we see a situation where 0:11:41.760 --> 0:11:45.960 fundamentally these these institutions are making their cost to capital um. 0:11:46.080 --> 0:11:48.920 With the exception of City, they're trading above tangible book value, 0:11:49.360 --> 0:11:53.120 and they're cheap relative of the market with an earnings outlook. 0:11:53.120 --> 0:11:56.400 That's that's okay. So I think that the traditional value 0:11:56.400 --> 0:11:59.480 investors are getting very intrigued by these institutions today. So 0:11:59.559 --> 0:12:01.319 let's spend a little bit more time at the single 0:12:01.440 --> 0:12:03.040 name level and get away from the sector just for 0:12:03.120 --> 0:12:05.800 a moment. Cities out in about forty minutes. You're not 0:12:05.840 --> 0:12:07.840 that optimistic. A lot of people keep saying to me, 0:12:07.840 --> 0:12:09.559 look at the cost story, look at the cost story 0:12:09.559 --> 0:12:11.640 with City. What is it about the cost story is 0:12:11.760 --> 0:12:13.760 City that we need to pay attention to when these 0:12:13.840 --> 0:12:16.200 numbers drop, Well, I think that's gonna be take a 0:12:16.200 --> 0:12:19.600 lot of parsing this time, because remember, with trading investment 0:12:19.640 --> 0:12:21.719 banking down as much as we expect they are, and 0:12:21.760 --> 0:12:24.080 they've already said they are, it's very hard to control 0:12:24.120 --> 0:12:28.240 those costs for the quarter. Yeah, let me do to 0:12:28.320 --> 0:12:30.200 rub But John, I think you nailed it. It's all 0:12:30.240 --> 0:12:33.280 about the cost story, John Farrell. Do you see John Farrell, 0:12:33.280 --> 0:12:36.040 and you're reading at all that anybody's talking about, Yeah, 0:12:36.040 --> 0:12:38.320 that we gotta make revenue, we gotta make money story. 0:12:38.679 --> 0:12:41.280 I think they are. But those revenue expectations have diminished 0:12:41.360 --> 0:12:43.760 so much going into the end of twenty and that's 0:12:43.800 --> 0:12:46.240 the problem, Fred, absolutely, and that's why it's hard to 0:12:46.280 --> 0:12:49.120 control the cost. That said, what we're also looking for 0:12:49.280 --> 0:12:51.000 is a read through to the rest of the industry, 0:12:51.000 --> 0:12:52.880 and that is what's going on with loan growth, what's 0:12:52.880 --> 0:12:55.080 going on in n ertist margins. What because we do 0:12:55.160 --> 0:12:58.160 believe the large regionals and the small and MidCap banks 0:12:58.160 --> 0:13:01.880 which were positive ongoming in this quarter, could actually outperform. 0:13:01.960 --> 0:13:04.079 How many bodies will be shared? I'm gonna pick on 0:13:04.200 --> 0:13:07.240 City Group two hundred and six thousand listed. I'm sure 0:13:07.240 --> 0:13:10.280 it's less than that right now, but five years from now. 0:13:10.320 --> 0:13:13.760 How big is a given two hundred thousand job bank. 0:13:14.559 --> 0:13:17.240 It's uh, you know, it's up to a lot of things. 0:13:17.320 --> 0:13:19.959 I mean, we'll ask value Act themselves. It's probably a 0:13:19.960 --> 0:13:22.040 better group to ask right now, to be honest, but 0:13:22.640 --> 0:13:24.319 given their position in it, but we have to think 0:13:24.320 --> 0:13:27.840 it's should be probably five to small. What bank are 0:13:27.880 --> 0:13:30.040 you gonna follow this week? What's a bell? Whether you 0:13:30.120 --> 0:13:34.120 care about Fred Cannon, I care about the fundamentals at Wells. 0:13:34.160 --> 0:13:36.920 It's the most domestic bank. We want to see how 0:13:36.960 --> 0:13:39.560 that loan growth if they even though they're constrained, if 0:13:39.559 --> 0:13:42.080 we saw some fundamental loan growth on the balance sheet, 0:13:42.320 --> 0:13:45.640 and we want to see what that they're just margin does. Finally, credit, 0:13:45.800 --> 0:13:48.200 is there any kind of sign that any credit problems 0:13:48.200 --> 0:13:50.120 because that will hurt the industry a lot. Like Fred 0:13:50.120 --> 0:13:52.560 Great to catch you out, friend, Canon KBW glob Will, 0:13:52.600 --> 0:14:09.600 Director of Research. Let us focus, I guess on the 0:14:09.600 --> 0:14:12.200 the Battle of Washington. We could look at London, we 0:14:12.200 --> 0:14:15.320 could look at some of the fractious governments of Europe 0:14:15.320 --> 0:14:18.560 and of course China. Always we do this with Leslie 0:14:18.640 --> 0:14:21.840 Benjamurrai of Chatham House, who does so much of their 0:14:22.160 --> 0:14:25.720 American coverage and with her work at Cambridge and at 0:14:25.760 --> 0:14:29.600 Ellessee as well. Leslie, good morning to you. Uh. We 0:14:29.600 --> 0:14:34.280 we spoke earlier in London about Washington and the dynamic 0:14:34.320 --> 0:14:36.680 that we'll see today. We've got a clear dynamic for 0:14:36.760 --> 0:14:40.360 Prime Minister May in Lynton, in In in England and 0:14:40.400 --> 0:14:43.440 Westminster in the Commonwealth. What will we see as the 0:14:43.520 --> 0:14:48.120 dynamic in Washington and the next forty eight hours. Well, 0:14:48.200 --> 0:14:50.960 there's so much pressure right now on Congress, on the 0:14:51.000 --> 0:14:53.880 Republicans and McConnell in particular, to come up with a 0:14:53.960 --> 0:14:56.040 deal that that so that we can get this the 0:14:56.120 --> 0:14:58.840 US government reopened as we fall over the weekend. The 0:14:58.880 --> 0:15:02.280 polls are suggesting that the public is blaming the president, 0:15:02.360 --> 0:15:05.320 and they're blaming the Republicans, not the Democrats. So I 0:15:05.320 --> 0:15:08.120 think there's tremendous pressure to cut a deal, but it's 0:15:08.120 --> 0:15:11.200 still unclear what that deal will be, other than perhaps 0:15:11.280 --> 0:15:13.840 more money for boarding security and a bit of a 0:15:13.840 --> 0:15:16.480 gift to the president. I mean, the summary of Brexit 0:15:16.600 --> 0:15:18.240 is maybe they're going to kick us the can in 0:15:18.240 --> 0:15:22.560 their own unique way down the road. Why can't Republicans 0:15:22.600 --> 0:15:27.760 and Democrats kick the can your respective of the president 0:15:28.240 --> 0:15:31.160 to get the government open and then deal with these 0:15:31.200 --> 0:15:35.640 tangible border and wall issues. Well, you know, that's the 0:15:35.640 --> 0:15:38.600 proposal that we're seeing right coming from Lindsay Graham, saying, 0:15:38.880 --> 0:15:42.040 let's reopen the government and continue to negotiate on the wall, 0:15:42.120 --> 0:15:43.640 try to get some money, and come back to that 0:15:43.680 --> 0:15:46.400 in the next few weeks, because it really is, you know, 0:15:46.440 --> 0:15:48.200 this is the longest shutdown that we've seen were in 0:15:48.240 --> 0:15:51.400 the day twenty four it is. It is tremendously problematic. 0:15:51.400 --> 0:15:54.160 But the Democrats are calling the Republicans tatask, and I 0:15:54.160 --> 0:15:56.720 think this has become really a battle about who is 0:15:56.760 --> 0:16:00.400 in charge in Washington that they're setting said, rolling a 0:16:00.400 --> 0:16:02.600 line in the sand. Um, And it's really about you know, 0:16:02.640 --> 0:16:05.320 whose authority will will continue to govern or will govern 0:16:05.400 --> 0:16:08.040 going forward? Leslie, As you indicate the president seems to 0:16:08.040 --> 0:16:11.040 be losing in the polls, is that tension point big 0:16:11.160 --> 0:16:15.880 enough to get him to pull a one A t unlikely? 0:16:15.920 --> 0:16:17.600 I mean the other you know, the other thing to 0:16:17.720 --> 0:16:19.480 note is that in the past, what we've seen is 0:16:19.520 --> 0:16:22.680 that presidents recover very quickly from shutdowns, that that sort 0:16:22.720 --> 0:16:26.440 of very negative public reaction tends to disappear within a 0:16:26.480 --> 0:16:29.400 couple of weeks. This is this could be different, Um, 0:16:29.440 --> 0:16:31.560 depending of course on you know, how much longer it 0:16:31.560 --> 0:16:34.800 goes on and how bad the optics are, because because 0:16:34.840 --> 0:16:36.680 you know, what we're seeing is that there's there's really 0:16:36.720 --> 0:16:39.560 no evidence to suggest that there's any kind of emergency, 0:16:40.040 --> 0:16:43.800 there's any justification for for closing down the government on 0:16:43.840 --> 0:16:46.160 the basis of you know, funding the wall in the 0:16:46.200 --> 0:16:48.320 short term. So I think if if we don't see 0:16:48.360 --> 0:16:51.720 some sort of resolution, this one might actually hurt the president. 0:16:51.760 --> 0:16:55.320 But whether that's enough to get him to turn around, um, uh, 0:16:56.120 --> 0:16:59.000 there's no sign right now that that's the case. So Leslie, 0:16:59.160 --> 0:17:01.960 the idea that he is recovery right in the polls, 0:17:02.080 --> 0:17:05.280 historically speaking, could play out once again for the president 0:17:05.280 --> 0:17:07.679 of the United States, President Donald Trump is one thing. 0:17:07.720 --> 0:17:09.960 The economic data is the same story. It's a similar story. 0:17:09.960 --> 0:17:12.080 You get these shutdowns, there are hits to economic growth, 0:17:12.080 --> 0:17:14.000 and then we make it up later on the year. 0:17:14.320 --> 0:17:17.000 So for market participants, leslie at Leaves, I'm asking a 0:17:17.119 --> 0:17:20.360 question they're familiar with. Why does this domestic political drama 0:17:20.800 --> 0:17:24.679 matter to us? What does it matter? Well, it matters, 0:17:24.720 --> 0:17:26.560 you know, if you if you think about the optics 0:17:26.560 --> 0:17:29.000 for anybody who's looking at the United States right now, 0:17:29.119 --> 0:17:32.119 you're talking about a government shutdown. That's that's a pretty 0:17:32.160 --> 0:17:34.480 serious thing. Even if you think that in the moment, 0:17:34.520 --> 0:17:36.719 you know, you might be okay financially, there's so much 0:17:36.800 --> 0:17:40.520 uncertainty that that creates going forward, and it creates, you know, 0:17:40.520 --> 0:17:43.679 it also raises a very significant question about what the 0:17:43.720 --> 0:17:46.119 next weeks and months are going to look like on 0:17:46.160 --> 0:17:48.879 pretty much anything, because what we're seeing right now is 0:17:48.880 --> 0:17:52.600 a Congress that isn't working together. Okay, I, I I. 0:17:52.800 --> 0:17:55.120 What you just said is brilliant And that's the great 0:17:55.160 --> 0:17:58.720 fear of anybody of any political persuasions that the view 0:17:58.800 --> 0:18:01.960 forward is going to be chairs just like this crazy 0:18:02.000 --> 0:18:05.879 shutdown that we're in. If that's the case, is there 0:18:05.920 --> 0:18:11.320 any desire to take away the enhanced executive powers which 0:18:11.320 --> 0:18:15.119 I'm going to signal back then in Watergate, I haven't 0:18:15.160 --> 0:18:19.040 heard that dialogue yet. Well that you know, first of all, 0:18:19.080 --> 0:18:21.320 there is an immediate crisis. People need to get the 0:18:21.359 --> 0:18:25.879 government open again. And then yeah, Congress is uh forever 0:18:26.000 --> 0:18:28.000 going to be wrestling The Democrats are going to be 0:18:28.000 --> 0:18:30.760 wrestling with how can they constrain the president? What mechanisms 0:18:30.800 --> 0:18:32.800 do they have? But remember where you know, the Senate 0:18:32.920 --> 0:18:35.240 is still controlled by the Republicans, and they're so far 0:18:35.800 --> 0:18:39.040 the Republicans are by and large supporting the president. So 0:18:39.119 --> 0:18:42.960 unless that changes, you know that the real possibility of 0:18:43.240 --> 0:18:47.680 enacting tangible constraints on the on the president's power um 0:18:47.680 --> 0:18:50.479 are are minimal. But as time goes by, And remember 0:18:50.520 --> 0:18:53.520 even for the president, right, it's in his interest for 0:18:53.640 --> 0:18:55.879 somebody to give him a win that he can take 0:18:56.040 --> 0:18:59.600 and move forward, because this isn't in his interest. Okay, 0:18:59.640 --> 0:19:01.800 that's well said. Do you do you see him actually 0:19:01.840 --> 0:19:05.520 indicating that he's willing to do that? To find an 0:19:05.560 --> 0:19:08.239 element or an item of wiggle room that allows him 0:19:08.280 --> 0:19:11.280 to quote unquote take a win. Well, this is the 0:19:11.320 --> 0:19:14.440 crazy part. Right at the moment, it really looks like 0:19:15.240 --> 0:19:19.200 neither the President nor the Democrats have any interest in 0:19:19.280 --> 0:19:22.040 putting anything positive on the table. Uh, you know, Linda 0:19:22.119 --> 0:19:24.879 Graham is different, and that could actually lead to some 0:19:26.119 --> 0:19:28.359 That could be the sign that there's going to be 0:19:28.400 --> 0:19:30.399 some movement. It's going to have to come from the Republicans. 0:19:30.400 --> 0:19:32.320 The President is not going to back down to the Democrats. 0:19:32.320 --> 0:19:33.959 The Republicans, I think, are going to have to come 0:19:34.000 --> 0:19:37.840 up with the plan that that allows the President to say, 0:19:37.880 --> 0:19:40.080 I've got the money for Board of Security, there's a 0:19:40.080 --> 0:19:42.879 bit of money here for the wall. Everybody sees that 0:19:42.960 --> 0:19:46.000 this is important, you know, and we're going to keep 0:19:46.000 --> 0:19:49.080 pushing on this. But that that's a very optimistic scenario 0:19:49.160 --> 0:19:52.159 at the moment. You know, there's nothing to indicate that 0:19:52.200 --> 0:19:54.399 the President's going in that direction. Well, Leslie, that's the 0:19:54.440 --> 0:19:57.240 domestic story. Internationally, it looks like the President could get 0:19:57.240 --> 0:19:58.879 a win, and he could get a win on trade. 0:19:59.320 --> 0:20:01.199 I don't know what that wind looks like, Leslie, but 0:20:01.280 --> 0:20:03.760 with the latest data out of China, looking at that, 0:20:03.840 --> 0:20:06.080 it looks like the Chinese are having some problems, and 0:20:06.119 --> 0:20:08.199 I just wonder whether that increases the chances of US 0:20:08.240 --> 0:20:11.280 finally getting some kind of breakthrough with the US China 0:20:11.320 --> 0:20:15.240 try dispute, Leslie, what do you think, Um? It does? 0:20:15.400 --> 0:20:17.920 It does look like there is you know, the desire 0:20:17.960 --> 0:20:20.440 and the part of the Chinese as well as on 0:20:20.680 --> 0:20:23.120 part of China as well as the United States, to 0:20:23.119 --> 0:20:26.480 to come to some sort of agreement. Um, whether that's 0:20:26.560 --> 0:20:30.480 significant and substantial enough to really alter the nature of 0:20:30.520 --> 0:20:35.120 that trading relationship, I'm skeptical, But whether it's substantial enough 0:20:35.119 --> 0:20:37.760 for the president to gain to gain a victory. I 0:20:37.800 --> 0:20:40.280 think that there is some some prospect for that. And 0:20:40.320 --> 0:20:42.399 remember he's you know, he's got a lot of backing 0:20:42.480 --> 0:20:44.480 across both sides of the isle. The United States are 0:20:44.520 --> 0:20:47.119 taking this tough line at the same time, you know 0:20:47.240 --> 0:20:50.879 that the U s economies had a few bobbles. What 0:20:50.880 --> 0:20:53.240