1 00:00:09,840 --> 00:00:13,800 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily 2 00:00:13,960 --> 00:00:17,560 Speaker 1: we bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:27,560 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Right 5 00:00:27,640 --> 00:00:30,800 Speaker 1: now an update, but it can be an update about 6 00:00:30,800 --> 00:00:34,240 Speaker 1: Washington as well. From Buffalo and from Albany and from 7 00:00:34,240 --> 00:00:37,680 Speaker 1: New York City, Kathy Hock joins the Lieutenant Governor of 8 00:00:37,720 --> 00:00:40,440 Speaker 1: the Empire State. Kathy, I want to go right to 9 00:00:40,479 --> 00:00:45,320 Speaker 1: the stimulus and the great contention that aid is necessary 10 00:00:45,440 --> 00:00:49,720 Speaker 1: for states, cities, and towns, and there's a debate about this. 11 00:00:50,240 --> 00:00:53,640 Speaker 1: The only thing that's going to catalyze that are furloughs 12 00:00:53,640 --> 00:00:57,200 Speaker 1: in layoffs. How close are you and Governor Cuomo to 13 00:00:57,400 --> 00:01:01,880 Speaker 1: furloughs and layoffs? Well, first, thanks for having me on 14 00:01:01,920 --> 00:01:04,280 Speaker 1: the show, but let me first address even why there's 15 00:01:04,319 --> 00:01:06,840 Speaker 1: even debate as to whether that we need stimulus. I 16 00:01:06,880 --> 00:01:10,680 Speaker 1: don't understand how anyone would conclude that we cannot survive 17 00:01:10,800 --> 00:01:15,000 Speaker 1: without a stimulus package. Here's why we never anticipated having 18 00:01:15,040 --> 00:01:17,560 Speaker 1: to deal with the global pandemic when our budget was 19 00:01:17,600 --> 00:01:20,160 Speaker 1: put together. Not New York, not any other state in 20 00:01:20,160 --> 00:01:24,039 Speaker 1: the nation. We have incurred extraordinary expenses. We've had a 21 00:01:24,160 --> 00:01:27,360 Speaker 1: huge hit to our sales tax revenues. Income taxes are 22 00:01:27,360 --> 00:01:30,160 Speaker 1: going to be plumbering. So all of our traditional revenue 23 00:01:30,200 --> 00:01:32,560 Speaker 1: sources are not there for us in the way that 24 00:01:32,800 --> 00:01:35,199 Speaker 1: we have projected them to be. So we will need 25 00:01:35,200 --> 00:01:39,160 Speaker 1: this stimulus plan. It's not debatable. New York State cannot 26 00:01:39,160 --> 00:01:41,800 Speaker 1: be left on its own. This is a national crisis, 27 00:01:41,840 --> 00:01:45,119 Speaker 1: a federal disaster, and if we had real leadership out 28 00:01:45,120 --> 00:01:48,960 Speaker 1: of Washington, they would understand that. Fortunately, the Democrats in 29 00:01:49,000 --> 00:01:52,600 Speaker 1: the House understand it, Chuck where understand that, but we're 30 00:01:52,640 --> 00:01:54,480 Speaker 1: not getting the support we need and they were going 31 00:01:54,520 --> 00:01:57,120 Speaker 1: to suffer. We should state to our global audience at 32 00:01:57,120 --> 00:02:00,560 Speaker 1: the persuasion of the lieutenant governors towards the Bocracy and 33 00:02:00,680 --> 00:02:04,280 Speaker 1: Mr Biden and the Democratic Party, can you wait out 34 00:02:04,520 --> 00:02:08,359 Speaker 1: to an inauguration? Can you wait out to a President Biden? 35 00:02:08,760 --> 00:02:13,680 Speaker 1: Can you get that far without furloughs and layoffs. I 36 00:02:13,720 --> 00:02:15,880 Speaker 1: don't have a projection on that at this point. We 37 00:02:15,919 --> 00:02:18,200 Speaker 1: have been going, you know, day to day, trying to 38 00:02:18,400 --> 00:02:20,720 Speaker 1: back Back in May, we had a plan passed by 39 00:02:20,720 --> 00:02:23,440 Speaker 1: the House that we thought could really address our needs. 40 00:02:23,480 --> 00:02:27,959 Speaker 1: We're asking for five billion dollars for states and local governments. 41 00:02:28,040 --> 00:02:30,640 Speaker 1: And that's not just the fund government operations. We're talking 42 00:02:30,639 --> 00:02:35,000 Speaker 1: about funding the health care workers, funding teachers, funding first responders, 43 00:02:35,040 --> 00:02:39,520 Speaker 1: funding critical programs, infrastructure. So this is these are all 44 00:02:39,600 --> 00:02:43,560 Speaker 1: the functions of government that have been direly affected because 45 00:02:43,600 --> 00:02:45,840 Speaker 1: of the loss of money coming in that we had 46 00:02:45,880 --> 00:02:48,280 Speaker 1: expected to be there this year. So we need this help. 47 00:02:48,480 --> 00:02:50,880 Speaker 1: Can we wait till Biden President? I don't know that 48 00:02:50,880 --> 00:02:53,920 Speaker 1: we'll have much choice, but hope springs eternal. I know 49 00:02:53,960 --> 00:03:01,120 Speaker 1: there's conversations uh with Secretary Treasumunution Lead Speaker Alsie, and 50 00:03:01,200 --> 00:03:03,480 Speaker 1: we hope that common sensal reign and they'll say, you 51 00:03:03,480 --> 00:03:06,360 Speaker 1: know what, we cannot leave these states to starve and 52 00:03:06,360 --> 00:03:09,880 Speaker 1: if not good for them politically, either lieutenant governor more locally. 53 00:03:10,280 --> 00:03:12,920 Speaker 1: There's been a lot written about the power struggle between 54 00:03:13,000 --> 00:03:16,239 Speaker 1: Governor Cuomo and Mayor du Blasio of New York City. 55 00:03:16,680 --> 00:03:19,240 Speaker 1: Does Governor Cuomo see di Blasio as part of the 56 00:03:19,280 --> 00:03:22,720 Speaker 1: problem or part of the solution at this point? Well, 57 00:03:22,800 --> 00:03:25,640 Speaker 1: you'd have to ask Governor Cuomo how we've used that relationships. 58 00:03:25,880 --> 00:03:28,799 Speaker 1: But I do know that we work with our local partners. 59 00:03:28,840 --> 00:03:31,480 Speaker 1: There's a lot of collaboration that goes on behind the 60 00:03:31,560 --> 00:03:34,560 Speaker 1: scenes that does not make the headlines. And uh, you know, 61 00:03:34,600 --> 00:03:37,520 Speaker 1: we need each other in this and but also you know, 62 00:03:37,640 --> 00:03:40,040 Speaker 1: just the recognition that it is the state that has 63 00:03:40,120 --> 00:03:43,200 Speaker 1: the ultimate decision as to whether or not, you know, 64 00:03:43,280 --> 00:03:46,000 Speaker 1: when and how you shut down during a pandemic, and 65 00:03:46,160 --> 00:03:48,560 Speaker 1: the same thing with when we reopen. And you know, 66 00:03:48,640 --> 00:03:51,120 Speaker 1: lately it's been referred to, you know, the hotspots and 67 00:03:51,160 --> 00:03:54,200 Speaker 1: how the governor had to step in to fill the 68 00:03:54,280 --> 00:03:57,920 Speaker 1: void because we're seeing areas of the state and specific 69 00:03:57,920 --> 00:04:01,760 Speaker 1: neighborhoods where the infection rate went up to five six seven. 70 00:04:02,640 --> 00:04:05,240 Speaker 1: That's not acceptable. The rest of the state today is 71 00:04:05,280 --> 00:04:08,840 Speaker 1: at one percent, and we cannot risk our recovery and 72 00:04:08,880 --> 00:04:13,080 Speaker 1: getting our economy back on all cylinders by having hotspots 73 00:04:13,240 --> 00:04:16,240 Speaker 1: because the issues weren't addressed early enough and in a 74 00:04:16,360 --> 00:04:18,400 Speaker 1: in a smart way, so the state has had to 75 00:04:18,440 --> 00:04:21,359 Speaker 1: step in. Kathy, there's also a question about quality of 76 00:04:21,400 --> 00:04:25,039 Speaker 1: life concerns. There's a question about trash collection given some 77 00:04:25,080 --> 00:04:27,159 Speaker 1: of the budget cuts, and there's very much a question 78 00:04:27,240 --> 00:04:30,760 Speaker 1: about making sure that the uptick in crime does not continue. 79 00:04:30,800 --> 00:04:33,720 Speaker 1: As an anecdote, there were helicopters over my building last night. 80 00:04:34,120 --> 00:04:36,520 Speaker 1: In general, it's not dangerous, but there was a shooting 81 00:04:36,839 --> 00:04:38,800 Speaker 1: more than ten blocks away. What are you guys doing 82 00:04:38,880 --> 00:04:42,839 Speaker 1: on that front now? And certainly that's all very unsettling 83 00:04:42,920 --> 00:04:45,680 Speaker 1: for the New Yorkers who stayed in The vast majority 84 00:04:45,880 --> 00:04:48,440 Speaker 1: did stay and they're weathering this out, and they also 85 00:04:48,520 --> 00:04:50,360 Speaker 1: know we've been through a lot before and we will 86 00:04:50,400 --> 00:04:52,760 Speaker 1: get through this. But in the day to day life 87 00:04:53,160 --> 00:04:55,960 Speaker 1: for people like yourselves and others, it's tough. But I 88 00:04:56,000 --> 00:04:58,600 Speaker 1: get back to Washington here. You want more money for 89 00:04:58,839 --> 00:05:02,080 Speaker 1: law enforcement, you want money for trash pick up. You 90 00:05:02,160 --> 00:05:06,279 Speaker 1: cannot starve the cities in the while expecting those services 91 00:05:06,320 --> 00:05:08,680 Speaker 1: to continue. The City of New York will have less 92 00:05:08,720 --> 00:05:11,800 Speaker 1: money to work with to fund those essential services than 93 00:05:11,839 --> 00:05:14,680 Speaker 1: they have predicted, and that money has to be replenished 94 00:05:14,680 --> 00:05:18,920 Speaker 1: by the federal government. Do you see, Cathy, a change 95 00:05:19,279 --> 00:05:25,520 Speaker 1: towards a more ecumenical, are more compromising two parties over 96 00:05:25,520 --> 00:05:29,240 Speaker 1: the next number of years or is there a permanence 97 00:05:29,279 --> 00:05:33,839 Speaker 1: to these rigidities between Washington and the Democrat Party states 98 00:05:34,040 --> 00:05:37,159 Speaker 1: With President Trump? Is there a permanence to that theme 99 00:05:37,680 --> 00:05:41,880 Speaker 1: or do you revert back to something more collegial it 100 00:05:42,000 --> 00:05:44,160 Speaker 1: reverts back. And I'll tell you why. I have been 101 00:05:44,200 --> 00:05:46,880 Speaker 1: a student of history. I'm old enough to have watched 102 00:05:47,200 --> 00:05:49,880 Speaker 1: the Watergate hearing that a kid, you know, watched a 103 00:05:50,000 --> 00:05:52,120 Speaker 1: gavel to gavel. I knew all the players like they're 104 00:05:52,160 --> 00:05:55,200 Speaker 1: part of my family. So I thought that our democracy 105 00:05:55,360 --> 00:05:58,240 Speaker 1: was imperiled back when I was just a teenager. And 106 00:05:58,360 --> 00:06:00,640 Speaker 1: I have seen the resiliency of this country. I have 107 00:06:00,720 --> 00:06:03,400 Speaker 1: seen that, yes, we can go to extremes. There were 108 00:06:03,760 --> 00:06:05,960 Speaker 1: nineteen six eight was a very tough year in our 109 00:06:06,080 --> 00:06:08,560 Speaker 1: nation and people, you know, cities were burnings. Remember being 110 00:06:08,560 --> 00:06:10,960 Speaker 1: a little kid going to visit Washington and seeing it 111 00:06:11,120 --> 00:06:14,640 Speaker 1: burning and the protests and what people was, what was happening, 112 00:06:14,760 --> 00:06:17,760 Speaker 1: you know, the division over the Vietnam War that divided 113 00:06:17,839 --> 00:06:21,560 Speaker 1: family against family. But we always swing back, the pendulum 114 00:06:21,680 --> 00:06:25,599 Speaker 1: swings back toward normalcy in the middle. And right now 115 00:06:25,640 --> 00:06:29,200 Speaker 1: we have a cult of personality around one individual. I 116 00:06:29,240 --> 00:06:31,560 Speaker 1: don't think that would have been the case if someone, 117 00:06:31,920 --> 00:06:33,920 Speaker 1: you know, let's say, Admit Romney or someone had been 118 00:06:33,920 --> 00:06:36,520 Speaker 1: elected instead of Donald Trumpets. So I think this is 119 00:06:36,880 --> 00:06:40,400 Speaker 1: all related to an individual who has promoted himself to 120 00:06:41,000 --> 00:06:44,400 Speaker 1: attract individuals who are extremists. That is going to go 121 00:06:44,480 --> 00:06:47,120 Speaker 1: back into the bottle and back underground where it belongs 122 00:06:47,560 --> 00:06:50,480 Speaker 1: when we have Joe Biden as president. But also he 123 00:06:50,560 --> 00:06:54,200 Speaker 1: understands we have to have relationships with Republicans and that's 124 00:06:54,200 --> 00:06:56,680 Speaker 1: how the two party system will continue to thrive in 125 00:06:56,720 --> 00:07:01,240 Speaker 1: our country. Still got an election to God, that election underway, 126 00:07:01,320 --> 00:07:03,360 Speaker 1: that result a little more than two weeks away. Kathy, 127 00:07:03,560 --> 00:07:06,120 Speaker 1: thanks for coming on the program, Kathy how New York 128 00:07:06,160 --> 00:07:12,680 Speaker 1: Lieutenant governor. Thank you very much. John. We've got to 129 00:07:12,720 --> 00:07:14,960 Speaker 1: go on to more important things here because with James 130 00:07:15,000 --> 00:07:18,760 Speaker 1: Anthy of Everdeen Standard, we can dive into the investment 131 00:07:18,840 --> 00:07:22,400 Speaker 1: space and talk a lot about it. But right now, 132 00:07:22,440 --> 00:07:26,360 Speaker 1: I mean Prime Minister Johnson, pandemic, Prime Minister Johnson Brexit. 133 00:07:26,560 --> 00:07:29,960 Speaker 1: Of course, we're looking at the race here and I'm sorry, James. 134 00:07:30,160 --> 00:07:32,480 Speaker 1: All eyes are on Sunday. I mean John and I 135 00:07:32,480 --> 00:07:34,840 Speaker 1: have been going back and forth on this and all 136 00:07:34,880 --> 00:07:38,080 Speaker 1: eyes on Sunday is for the Todds. Gareth Bale is 137 00:07:38,080 --> 00:07:42,600 Speaker 1: gonna come back. What's it gonna mean for Tottenham? I 138 00:07:42,640 --> 00:07:44,640 Speaker 1: think we've just put together the best front three and 139 00:07:44,680 --> 00:07:47,480 Speaker 1: world football, so I'm pretty excited. As his first fan 140 00:07:47,600 --> 00:07:52,040 Speaker 1: myself I'm looking forward to gold s galore. I mean, John, 141 00:07:52,040 --> 00:07:55,800 Speaker 1: are your eyes all on Sunday? My eyes are on Saturday, 142 00:07:56,080 --> 00:07:59,480 Speaker 1: As he sighed, Darthy, Liverpool Everton just gonna be fiery. 143 00:07:59,720 --> 00:08:02,000 Speaker 1: We got that shut down too. This is a big 144 00:08:02,000 --> 00:08:03,560 Speaker 1: we done that. Can we move on? Yeah? I mean, 145 00:08:03,560 --> 00:08:05,760 Speaker 1: I don't know what I'm talking about, but James is right, 146 00:08:05,880 --> 00:08:08,000 Speaker 1: this is a huge deal for the two minutes ago. 147 00:08:08,080 --> 00:08:13,480 Speaker 1: I get this shows guys coming from space or whatever 148 00:08:13,640 --> 00:08:17,440 Speaker 1: the pharaoh's golf stream up to England to help the chart. 149 00:08:17,520 --> 00:08:20,400 Speaker 1: So they'll do that on Sunday. Okay, under the markets 150 00:08:20,480 --> 00:08:23,600 Speaker 1: right now, James, ain't you with us? With everything? Stander? James, 151 00:08:23,720 --> 00:08:27,200 Speaker 1: things have changed. How do you structure? How do you 152 00:08:27,280 --> 00:08:34,160 Speaker 1: have a strategic investment plan for Q one two thousand one? Yeah? 153 00:08:34,200 --> 00:08:36,920 Speaker 1: With great difficulty, because you've got obviously a huge, well known, 154 00:08:36,920 --> 00:08:39,840 Speaker 1: well advertised risk event where I think there are genuinely 155 00:08:39,840 --> 00:08:45,800 Speaker 1: probably three possible outcomes which have relatively high likelihood each 156 00:08:45,880 --> 00:08:49,840 Speaker 1: of them. Um and probably the world looks looks somewhat, 157 00:08:49,880 --> 00:08:52,760 Speaker 1: if not vastly different further down the line depending on 158 00:08:52,920 --> 00:08:55,280 Speaker 1: the outcome. Then obviously I'm talking about US election. I 159 00:08:55,280 --> 00:08:57,280 Speaker 1: think it's very difficult to see the House switching back 160 00:08:57,280 --> 00:09:00,120 Speaker 1: to the Republicans, so you're talking about Biden verse is 161 00:09:00,120 --> 00:09:02,880 Speaker 1: Trump and then does the Senate switch to the Democrats? 162 00:09:02,880 --> 00:09:06,200 Speaker 1: And you know, if it's a split Congress, I don't 163 00:09:06,240 --> 00:09:08,960 Speaker 1: think that's great for for risk you know, whoever's in 164 00:09:09,000 --> 00:09:11,520 Speaker 1: the White House. But if if, if, if there is 165 00:09:11,559 --> 00:09:13,360 Speaker 1: a blue wave of blue sweet, whatever you want to 166 00:09:13,360 --> 00:09:15,960 Speaker 1: call it, I think the market wants to run with 167 00:09:16,040 --> 00:09:19,600 Speaker 1: that as being gross inflation, reflation bad for treasuries. And 168 00:09:19,600 --> 00:09:22,640 Speaker 1: that's a very different world to something where risk assets 169 00:09:22,760 --> 00:09:24,559 Speaker 1: have to price that out, have a bit of a 170 00:09:24,600 --> 00:09:28,000 Speaker 1: wobble and treasuries rally. So truly looking through that event, 171 00:09:28,679 --> 00:09:32,000 Speaker 1: it's very difficult. We're in such a such a difficult 172 00:09:32,080 --> 00:09:35,800 Speaker 1: strategic macro environment anyway, in my opinion, there is you know, 173 00:09:35,920 --> 00:09:39,000 Speaker 1: we've seen huge, huge holes blown in global economies and 174 00:09:39,040 --> 00:09:41,720 Speaker 1: now we're trying to patch them up, and and real 175 00:09:41,760 --> 00:09:45,559 Speaker 1: time data is is not a huge use in guiding 176 00:09:45,600 --> 00:09:47,520 Speaker 1: you as to what the medium term trajectory is. So 177 00:09:47,840 --> 00:09:51,160 Speaker 1: huge uncertainty, very difficult, James, I just don't know how 178 00:09:51,160 --> 00:09:53,480 Speaker 1: you invest around this. Going into year end, you've gone 179 00:09:53,480 --> 00:09:56,080 Speaker 1: through all the different outcomes we could get from the election. 180 00:09:56,720 --> 00:09:59,560 Speaker 1: The difference between a blue wave and a divided government 181 00:09:59,559 --> 00:10:02,120 Speaker 1: could be too trillion dollars in stimulus. How do you 182 00:10:02,160 --> 00:10:05,480 Speaker 1: invest around that? James, Yeah, it's difficult. I mean two 183 00:10:05,480 --> 00:10:08,040 Speaker 1: trillion dollars in stimulus today as we sit here, it 184 00:10:08,080 --> 00:10:10,400 Speaker 1: feels kind of like a small number. That's how crazy 185 00:10:10,480 --> 00:10:13,839 Speaker 1: things have got. As I say it is, It is 186 00:10:13,880 --> 00:10:17,440 Speaker 1: difficult because you have bimodal sort of scenario. You have 187 00:10:17,520 --> 00:10:21,920 Speaker 1: two very different outcomes and a reasonably close probability between 188 00:10:21,960 --> 00:10:24,640 Speaker 1: the two. So I think we're going to be running 189 00:10:24,640 --> 00:10:27,199 Speaker 1: a lot less risk into that risk event. Then we're 190 00:10:27,280 --> 00:10:29,800 Speaker 1: running at the moment for exactly that reason. I don't 191 00:10:30,160 --> 00:10:32,239 Speaker 1: you know, if I were to game in our probability 192 00:10:32,320 --> 00:10:35,200 Speaker 1: adjust the outcomes, you get something that looks quite neutral, 193 00:10:35,240 --> 00:10:37,360 Speaker 1: because there's a reasonable chance of something going up on 194 00:10:37,360 --> 00:10:39,559 Speaker 1: a reasonable chance of they're going down. I do think 195 00:10:39,559 --> 00:10:41,480 Speaker 1: there are still a few places that you can feel 196 00:10:41,600 --> 00:10:45,360 Speaker 1: somewhat comfortable having a position. But I don't think, you know, 197 00:10:45,360 --> 00:10:48,560 Speaker 1: the FEDS policy is going to be changed in any way, 198 00:10:48,559 --> 00:10:51,120 Speaker 1: shape or formed by the outcome, And so if you 199 00:10:51,120 --> 00:10:54,320 Speaker 1: want to hunker down in five year treasuries, maybe even 200 00:10:54,320 --> 00:10:55,880 Speaker 1: a little bit further out. I don't think you're going 201 00:10:55,920 --> 00:10:59,040 Speaker 1: to see a huge amount of volatility there um. But 202 00:10:59,240 --> 00:11:01,120 Speaker 1: but you know, other than that, it's difficult to have 203 00:11:01,160 --> 00:11:03,720 Speaker 1: a strategic view as we sit here, and I think 204 00:11:03,760 --> 00:11:05,360 Speaker 1: there's technical things like I kind of want to talk 205 00:11:05,360 --> 00:11:07,200 Speaker 1: about stuff, some of the technical stuff that was going on, 206 00:11:07,240 --> 00:11:09,319 Speaker 1: I don't. You know, we don't use options heavily, and 207 00:11:09,360 --> 00:11:12,040 Speaker 1: I'm not a massive sort of options expert or what 208 00:11:12,080 --> 00:11:14,160 Speaker 1: have you, but we've still got this massive situation where 209 00:11:14,200 --> 00:11:16,559 Speaker 1: huge option buying is going on in ecuty markets, in 210 00:11:16,800 --> 00:11:19,440 Speaker 1: the market general and single name tech tech stocks, and 211 00:11:19,480 --> 00:11:22,240 Speaker 1: we have option expiry today, and therefore the gamma that 212 00:11:22,280 --> 00:11:24,719 Speaker 1: you get from from those options getting closer to out 213 00:11:24,720 --> 00:11:26,520 Speaker 1: the money and then further away from out the money. 214 00:11:26,720 --> 00:11:28,200 Speaker 1: You know, these are the things I think which are 215 00:11:28,120 --> 00:11:31,640 Speaker 1: actually driving markets a lot more than the macro environment 216 00:11:31,640 --> 00:11:34,280 Speaker 1: on a day to day basis. And that's something that 217 00:11:34,320 --> 00:11:37,440 Speaker 1: can be both an opportunity and a huge risk. So James, 218 00:11:37,440 --> 00:11:40,160 Speaker 1: can you quantify how much you've wrote down risk, how 219 00:11:40,200 --> 00:11:42,280 Speaker 1: much you've gone into five Your treasury is to hunker 220 00:11:42,320 --> 00:11:46,359 Speaker 1: down and prepared to be liquid and nimble when things change. 221 00:11:47,080 --> 00:11:50,040 Speaker 1: I mean, that's a process that's not something that we're 222 00:11:50,040 --> 00:11:51,840 Speaker 1: you know that we've done a huge amount of at 223 00:11:51,920 --> 00:11:55,679 Speaker 1: this stage because we're still reasonably far from the election. 224 00:11:55,720 --> 00:11:58,160 Speaker 1: And to be honest, you know where if you look 225 00:11:58,160 --> 00:12:00,000 Speaker 1: at polling experts, if I were to just pick five 226 00:12:00,080 --> 00:12:03,320 Speaker 1: thirty eight and say that's somewhat symptomatic of broadly speaking 227 00:12:03,320 --> 00:12:06,240 Speaker 1: the polling experts for you, you know that that's suggesting 228 00:12:06,280 --> 00:12:09,320 Speaker 1: Biden has roughly a chance of winning the White House 229 00:12:09,360 --> 00:12:13,319 Speaker 1: and maybe the Senate has a chance of switching over 230 00:12:13,360 --> 00:12:16,480 Speaker 1: to the Democrats. Obviously, those two probabilities are closely connected. 231 00:12:16,520 --> 00:12:18,360 Speaker 1: You can't see the chances of the Dems switch in 232 00:12:18,400 --> 00:12:20,840 Speaker 1: the Senate going up without Biden's chances going up. I 233 00:12:20,840 --> 00:12:22,320 Speaker 1: look at eighty five, and I say, in a two 234 00:12:22,320 --> 00:12:26,960 Speaker 1: horse race this far out, with the polling's problems, shall 235 00:12:27,000 --> 00:12:29,160 Speaker 1: we say that we've had in the last two elections 236 00:12:29,160 --> 00:12:31,280 Speaker 1: where actually, you know, Romney was leading at this stage, 237 00:12:31,280 --> 00:12:33,040 Speaker 1: in Clinton was leading at this stage, and neither of 238 00:12:33,040 --> 00:12:35,679 Speaker 1: those one that looks to me like that's overpriced. So 239 00:12:35,720 --> 00:12:38,040 Speaker 1: we're happy to oppose that for now because it looks 240 00:12:38,080 --> 00:12:41,920 Speaker 1: like too much a probability of Biden, and by extension, 241 00:12:42,200 --> 00:12:45,320 Speaker 1: a blue wave has been priced into the market. And 242 00:12:45,400 --> 00:12:48,640 Speaker 1: we expect other investors to de risk going into the election, 243 00:12:48,679 --> 00:12:51,440 Speaker 1: and that's likely to be there for the most heavily 244 00:12:51,440 --> 00:12:54,360 Speaker 1: positioned assets which see some unwind and risk assets definitely 245 00:12:54,400 --> 00:12:56,560 Speaker 1: fits the bill. Big tech definitely fits the bill. So 246 00:12:56,920 --> 00:13:00,000 Speaker 1: you know we're positioned in opposition to that for now, 247 00:13:00,360 --> 00:13:02,920 Speaker 1: and we will look for opportunities to just take the 248 00:13:03,040 --> 00:13:06,480 Speaker 1: overall risk level down quite considerably, to be honest, into 249 00:13:06,520 --> 00:13:09,960 Speaker 1: the risk of vent itself. James Covery is for a second, 250 00:13:10,000 --> 00:13:12,280 Speaker 1: I'm going to talk about the B word. Here's a 251 00:13:12,320 --> 00:13:15,560 Speaker 1: covered Brexit cable turning around one nine un changed on 252 00:13:15,559 --> 00:13:18,960 Speaker 1: the session. The Prime Minister about forty minutes ago basically 253 00:13:19,040 --> 00:13:21,720 Speaker 1: signal think he's ready to walk away from negotiations. And 254 00:13:21,760 --> 00:13:24,520 Speaker 1: guess what an EU official thinks. According to our reporting, 255 00:13:24,559 --> 00:13:27,640 Speaker 1: the EU expecting Brexit talks to continue with the United 256 00:13:27,679 --> 00:13:31,320 Speaker 1: Kingdom next week. Tom, we talked about this, the posturing 257 00:13:31,360 --> 00:13:33,760 Speaker 1: around this story. It's a prime minister trying to put 258 00:13:33,800 --> 00:13:36,800 Speaker 1: some pressure on the EU. I'm not sure the European 259 00:13:36,920 --> 00:13:41,120 Speaker 1: Union feels it right now, and Sterling is capturing that story. Okay, 260 00:13:41,160 --> 00:13:43,000 Speaker 1: it's a game of blood. But John, I remember you 261 00:13:43,120 --> 00:13:47,679 Speaker 1: planted in the chair the first morning after Brexit. What's changed? 262 00:13:47,760 --> 00:13:51,160 Speaker 1: I mean, I don't understand what's changed from that moment 263 00:13:51,200 --> 00:13:53,640 Speaker 1: when you were on our old set over in Finsbury 264 00:13:53,760 --> 00:13:57,360 Speaker 1: Square talking about Brexit versus where we are right now. 265 00:13:57,360 --> 00:14:00,680 Speaker 1: I know what's really changed in the power game between 266 00:14:00,679 --> 00:14:04,400 Speaker 1: these two parties, two prime ministers and not much house. 267 00:14:04,480 --> 00:14:07,040 Speaker 1: That's what's changed before and a half years, James fe 268 00:14:07,400 --> 00:14:09,840 Speaker 1: how on earth do you trade this one? And for 269 00:14:09,920 --> 00:14:12,880 Speaker 1: me around the negotiations, how do you know what is 270 00:14:12,960 --> 00:14:18,320 Speaker 1: real negotiation and what is just posturing? Yeah, really good question, 271 00:14:18,440 --> 00:14:20,320 Speaker 1: really difficult questions. Some of this comes from just the 272 00:14:20,400 --> 00:14:23,200 Speaker 1: nature of negotiating as the EU or with the EU, 273 00:14:23,360 --> 00:14:26,240 Speaker 1: you're talking about twenty odd countries that have to compromise 274 00:14:26,280 --> 00:14:28,960 Speaker 1: with each other just to get to an EU position. 275 00:14:28,960 --> 00:14:30,800 Speaker 1: And then obviously if there's somebody on the other side 276 00:14:30,800 --> 00:14:34,280 Speaker 1: of the table, they've got their own views about what prioritizing, 277 00:14:34,320 --> 00:14:37,440 Speaker 1: what they can sacrifice, and therefore as an incredibly complex negotiation. 278 00:14:37,840 --> 00:14:39,920 Speaker 1: I would just agree broadly with the idea that for 279 00:14:41,400 --> 00:14:44,080 Speaker 1: possibly not as long as as going back to sixteen, 280 00:14:44,120 --> 00:14:46,400 Speaker 1: but certainly for the last twelve months, nothing really has 281 00:14:46,480 --> 00:14:48,720 Speaker 1: changed both sides of talking past each other. This is 282 00:14:48,720 --> 00:14:52,600 Speaker 1: a game of chicken. The politics has changed dramatically in 283 00:14:52,640 --> 00:14:55,760 Speaker 1: the UK such that their view of how to negotiate 284 00:14:55,800 --> 00:15:00,320 Speaker 1: has changed dramatically, and therefore it's a more robust, more 285 00:15:00,360 --> 00:15:03,840 Speaker 1: politically supported, shall we say, hard and negotiating position. No 286 00:15:03,960 --> 00:15:07,000 Speaker 1: deal is better than a bad deal on the EU side, 287 00:15:07,040 --> 00:15:10,200 Speaker 1: I don't think they're quite there, but again, the political 288 00:15:10,200 --> 00:15:14,840 Speaker 1: reality of the negotiations is that doing a deal where 289 00:15:14,840 --> 00:15:18,240 Speaker 1: the compromises necessary in advance of an absolute drop dead 290 00:15:18,400 --> 00:15:22,600 Speaker 1: deadline is an unsatisfactory political outcome because you can't then 291 00:15:22,640 --> 00:15:25,120 Speaker 1: go back to domestic audiences who you might have had 292 00:15:25,160 --> 00:15:26,960 Speaker 1: to sacrifice a little bit to get the deal over 293 00:15:27,000 --> 00:15:28,840 Speaker 1: the line and say you fought as hard as you 294 00:15:28,880 --> 00:15:30,800 Speaker 1: possibly could. So it has to go to the wire. 295 00:15:30,960 --> 00:15:33,160 Speaker 1: You have to dangle people over the edge, make them 296 00:15:33,200 --> 00:15:35,880 Speaker 1: look into the abyss, and that's then and only then 297 00:15:35,920 --> 00:15:38,920 Speaker 1: will you get some sort of compromise that the headlines 298 00:15:38,920 --> 00:15:41,400 Speaker 1: you described today, I mean that tells you all you 299 00:15:41,440 --> 00:15:43,080 Speaker 1: need to know in terms of how you invest. I 300 00:15:43,080 --> 00:15:44,920 Speaker 1: think you can be long guilts because I don't think 301 00:15:44,960 --> 00:15:47,200 Speaker 1: there's a huge sell off in the guilt market if 302 00:15:47,240 --> 00:15:48,880 Speaker 1: there is a deal. I think that you know the 303 00:15:48,920 --> 00:15:52,400 Speaker 1: economic situation the virus situation, the global duration situation more 304 00:15:52,400 --> 00:15:55,520 Speaker 1: broadly is supportive for owning guilts. You know, we're tactically 305 00:15:55,520 --> 00:15:59,120 Speaker 1: short sterling, as we've talked about before. One observation from 306 00:15:59,160 --> 00:16:01,840 Speaker 1: today it's a bit disappointing for me as somebody who 307 00:16:01,920 --> 00:16:04,960 Speaker 1: is short sterling on a tactical basis. The downside to 308 00:16:05,080 --> 00:16:08,480 Speaker 1: cable when that first headline hit was relatively small and 309 00:16:08,560 --> 00:16:11,720 Speaker 1: quickly reversed. But then when you get a positive headline 310 00:16:11,720 --> 00:16:13,520 Speaker 1: on the other side, the market wants to run with that. 311 00:16:13,600 --> 00:16:17,160 Speaker 1: So I still think there is a sentiment um sort 312 00:16:17,160 --> 00:16:20,560 Speaker 1: of asymmetry that the market really isn't prepared to believe 313 00:16:21,120 --> 00:16:23,600 Speaker 1: that the UK will walk away, which means actually short 314 00:16:23,640 --> 00:16:27,320 Speaker 1: sterling increasingly looks like a position that is will only 315 00:16:27,480 --> 00:16:30,560 Speaker 1: really benefit on the outcome if we are December thirty 316 00:16:30,600 --> 00:16:32,760 Speaker 1: one have walked away and there is no deal, So 317 00:16:32,800 --> 00:16:35,080 Speaker 1: that that changes the dynamics a little bit. And that's 318 00:16:35,080 --> 00:16:38,960 Speaker 1: that something I've been observing more recently. But again I 319 00:16:38,960 --> 00:16:40,880 Speaker 1: don't think you can have high conviction. I would make 320 00:16:40,880 --> 00:16:43,640 Speaker 1: it fifty fifty that we either get a deal of 321 00:16:43,680 --> 00:16:46,360 Speaker 1: some sort or all. We don't. I don't know what 322 00:16:46,400 --> 00:16:49,400 Speaker 1: you can have our conviction on at all right now, James, 323 00:16:49,400 --> 00:16:52,240 Speaker 1: great to catch up, Sir James Athley talks about there 324 00:16:56,000 --> 00:16:58,520 Speaker 1: right now. It is the advantage if you were a 325 00:16:58,600 --> 00:17:01,840 Speaker 1: successful a hundred years ago. There was Lever Brothers and 326 00:17:01,840 --> 00:17:04,280 Speaker 1: then Uni Lever and all the rest of that. There 327 00:17:04,359 --> 00:17:07,919 Speaker 1: is a trust of the Lever family and Jeffrey Howard 328 00:17:08,119 --> 00:17:13,080 Speaker 1: at University College London is writing new books thinking about 329 00:17:13,080 --> 00:17:18,040 Speaker 1: our dangerous dialogue are dangerous discourse in politics? Were thrilled 330 00:17:18,240 --> 00:17:21,280 Speaker 1: that Professor Howard could join us. Uh, this morning, You've 331 00:17:21,280 --> 00:17:25,360 Speaker 1: got a new book coming out, Jeffrey Howard on dangerous discussion? 332 00:17:25,480 --> 00:17:29,200 Speaker 1: Is that what we observed last night? Well, I think 333 00:17:29,240 --> 00:17:31,040 Speaker 1: we observed quite a bit of it last night. It 334 00:17:31,119 --> 00:17:34,040 Speaker 1: was a quite striking moment, I think when Savannah Guthrie 335 00:17:34,119 --> 00:17:37,000 Speaker 1: was pressing the President of the United States about whether 336 00:17:37,040 --> 00:17:41,040 Speaker 1: he would disown this extremely fringe conspiracy theory known as 337 00:17:41,320 --> 00:17:44,680 Speaker 1: Q and on one that alleges that top Democrats are 338 00:17:44,760 --> 00:17:48,720 Speaker 1: inco hoots with pedophiles and sex traffickers, and that Donald 339 00:17:48,760 --> 00:17:51,639 Speaker 1: Trump is really a secret agent aiming to save the 340 00:17:51,640 --> 00:17:55,040 Speaker 1: world from these nefarious villains. And of course Trump wouldn't 341 00:17:55,200 --> 00:17:57,600 Speaker 1: disown it. In fact, he claimed that he didn't know 342 00:17:57,680 --> 00:18:00,439 Speaker 1: anything about it before then jumping in and say, oh, 343 00:18:00,560 --> 00:18:03,280 Speaker 1: but there against pedophiles and that's a good thing. Clearly 344 00:18:03,320 --> 00:18:05,520 Speaker 1: he's lying. Clearly he knows quite a bit about it. 345 00:18:05,560 --> 00:18:08,040 Speaker 1: Doesn't mean I mean, Professor Howard. What's important here is 346 00:18:08,080 --> 00:18:10,640 Speaker 1: Lisa Bramwints and John Farroll get the love notes. I've 347 00:18:10,680 --> 00:18:13,200 Speaker 1: gotten the hate mail, and I've already gotten hate mail 348 00:18:13,280 --> 00:18:19,720 Speaker 1: this morning from Trump supporters who separate his discourse from 349 00:18:19,880 --> 00:18:23,400 Speaker 1: policy and from what they believe are the attributes they 350 00:18:23,440 --> 00:18:26,879 Speaker 1: can vote for. Is that appropriate? Is that going to 351 00:18:26,960 --> 00:18:31,960 Speaker 1: be something new to American politics? Look, we're going to 352 00:18:32,000 --> 00:18:34,919 Speaker 1: the polls. It's always a lesser evil justification, right, and 353 00:18:34,960 --> 00:18:38,919 Speaker 1: we never have candidates that line perfectly with our deepest values. 354 00:18:38,960 --> 00:18:41,800 Speaker 1: And of course, sometimes it would be appropriate to support 355 00:18:41,840 --> 00:18:44,959 Speaker 1: someone even though you disagreed with their language or their rhetoric, 356 00:18:45,040 --> 00:18:47,679 Speaker 1: if you thought they were good in terms of the 357 00:18:47,720 --> 00:18:51,479 Speaker 1: content they delivered for the country. The problem with the president, however, 358 00:18:51,520 --> 00:18:54,840 Speaker 1: is that his language actually does have consequences. It has 359 00:18:54,880 --> 00:18:57,800 Speaker 1: implications for the kind of country we're living in, for 360 00:18:57,960 --> 00:19:01,879 Speaker 1: the coarseness of public dialogue, and as we get closer 361 00:19:01,880 --> 00:19:04,639 Speaker 1: to the election, I think it's very reasonable to worry 362 00:19:04,680 --> 00:19:08,119 Speaker 1: about the ways in which his unhinged rhetoric might, in 363 00:19:08,200 --> 00:19:11,720 Speaker 1: some occasions leads to violence. In the town hall last night, 364 00:19:11,720 --> 00:19:15,000 Speaker 1: he again mentioned Governor Gretchen Whitmer of Michigan by name, 365 00:19:15,200 --> 00:19:20,440 Speaker 1: despite the attack, the plot by militia terrorists to Kidnapperr 366 00:19:20,480 --> 00:19:22,919 Speaker 1: only recently. And I think we need to be extremely 367 00:19:22,960 --> 00:19:25,520 Speaker 1: alarmed about that. And people who say, don't worry about 368 00:19:25,520 --> 00:19:27,439 Speaker 1: the language, it doesn't make a difference, you need to 369 00:19:27,440 --> 00:19:31,160 Speaker 1: realize that sometimes it does make a difference. Professor. Let's 370 00:19:31,160 --> 00:19:33,639 Speaker 1: talk about the polls right now where the president is 371 00:19:33,680 --> 00:19:38,400 Speaker 1: really struggling several demographics, including an older demographic, particularly in Florida, 372 00:19:38,440 --> 00:19:40,800 Speaker 1: which is a huge change from four years ago, at 373 00:19:40,800 --> 00:19:44,280 Speaker 1: suburban females as well. How can you make inroads into 374 00:19:44,280 --> 00:19:49,040 Speaker 1: those demographics with a little more than two weeks to go. Well, 375 00:19:49,080 --> 00:19:51,639 Speaker 1: there's not a lot of time, and Trump is spending 376 00:19:51,680 --> 00:19:56,520 Speaker 1: time in places that he traditionally or Republican candidates traditionally 377 00:19:56,680 --> 00:19:59,680 Speaker 1: wouldn't have to be spending time in places like Georgia. 378 00:20:00,040 --> 00:20:02,359 Speaker 1: So I think it's I'd be extremely alarmed if I 379 00:20:02,400 --> 00:20:05,800 Speaker 1: was inside the Trump campaign right now. Um. Now, it's 380 00:20:06,000 --> 00:20:08,199 Speaker 1: easy to look at the national polls and say that 381 00:20:08,480 --> 00:20:10,320 Speaker 1: Biden's got it in the bag. But of course we 382 00:20:10,359 --> 00:20:12,919 Speaker 1: need to remember that in the swing states it's still 383 00:20:13,040 --> 00:20:15,879 Speaker 1: pretty closed and anything could happen. So that's why I 384 00:20:15,960 --> 00:20:19,600 Speaker 1: think Biden is being very true to spend time in 385 00:20:19,640 --> 00:20:23,920 Speaker 1: places like Pennsylvania making sure that he's making those conversations 386 00:20:23,920 --> 00:20:27,200 Speaker 1: and contacts with the kind of suburban women voters that 387 00:20:27,240 --> 00:20:29,240 Speaker 1: Trump has been a lot to turn off in the 388 00:20:29,320 --> 00:20:32,080 Speaker 1: last few years, and certainly they showed up in droves 389 00:20:32,080 --> 00:20:35,159 Speaker 1: at the polls during the mid terms to repudiate Trump, 390 00:20:35,280 --> 00:20:38,119 Speaker 1: and it seems overwhelmingly likely that that will happen again. 391 00:20:38,280 --> 00:20:41,600 Speaker 1: Just the other night, Trump directly appealed to suburban women, 392 00:20:41,720 --> 00:20:43,879 Speaker 1: saying that it's really important that they like him, but 393 00:20:43,920 --> 00:20:47,240 Speaker 1: he didn't proceed to give any compelling argument about why 394 00:20:47,480 --> 00:20:50,320 Speaker 1: they could support a Trump administration. And that's problem, although 395 00:20:50,359 --> 00:20:52,760 Speaker 1: in fairness, he was doing that a little bit uh 396 00:20:52,800 --> 00:20:55,639 Speaker 1: in a self deprecating way. But Jeffrey, let's look forward 397 00:20:55,720 --> 00:20:58,520 Speaker 1: the idea that perhaps the polls are not vastly wrong 398 00:20:58,880 --> 00:21:02,040 Speaker 1: and Joe Biden does in the election. What happens after that, 399 00:21:02,119 --> 00:21:05,840 Speaker 1: in the months before January, when there is a transition 400 00:21:05,840 --> 00:21:10,280 Speaker 1: of power, how messy, could things get well? I think 401 00:21:10,320 --> 00:21:12,320 Speaker 1: that there are a number of different scenarios that might 402 00:21:12,359 --> 00:21:15,080 Speaker 1: play out. One kind of scenario, of course, is the 403 00:21:15,119 --> 00:21:19,440 Speaker 1: president continuing to capt doubt on the validity of the election, 404 00:21:19,760 --> 00:21:22,600 Speaker 1: but it actually not making a difference to what ultimately 405 00:21:22,880 --> 00:21:27,360 Speaker 1: transpires in January. It's entirely conceivable that Trump will continue 406 00:21:27,400 --> 00:21:30,639 Speaker 1: to um degrade the legitimacy of the election without any 407 00:21:30,680 --> 00:21:34,480 Speaker 1: intention of actually trying to stay in office. This could 408 00:21:34,480 --> 00:21:36,760 Speaker 1: be simply a way of keeping its supporters with him 409 00:21:36,800 --> 00:21:39,760 Speaker 1: in January as he looks ahead to perhaps set up 410 00:21:39,760 --> 00:21:43,359 Speaker 1: a Trump TV station, so he retains a sizable portion 411 00:21:43,400 --> 00:21:45,520 Speaker 1: of the electorate who stays on his side and is 412 00:21:45,560 --> 00:21:49,000 Speaker 1: willing to to watch his television programs. But that's I 413 00:21:49,040 --> 00:21:52,040 Speaker 1: think the most optimistic projection. I think it seems at 414 00:21:52,080 --> 00:21:55,280 Speaker 1: least conceivable that he could inspire his supporters to go 415 00:21:55,320 --> 00:21:58,200 Speaker 1: into the streets to engage in violence. We could imagine 416 00:21:58,240 --> 00:22:02,159 Speaker 1: Trump supporters um making a big scene about the election 417 00:22:02,200 --> 00:22:05,720 Speaker 1: in the streets where who knows left wing counter protesters 418 00:22:05,760 --> 00:22:09,679 Speaker 1: show up uh to agitate against those Trump supporters, and 419 00:22:09,760 --> 00:22:13,080 Speaker 1: that really would be a powder kig that would could 420 00:22:13,080 --> 00:22:19,520 Speaker 1: be extremely extremely supporting stop that's really inflammator. Are you 421 00:22:19,640 --> 00:22:24,040 Speaker 1: predicting that we could see that kind of response from 422 00:22:24,080 --> 00:22:26,760 Speaker 1: people or in this nation? Do we move on in 423 00:22:26,800 --> 00:22:31,960 Speaker 1: a more peaceable way? Oh? So, the cast when we're 424 00:22:32,160 --> 00:22:35,440 Speaker 1: being for cautious is to play out all the different scenarios. Now, clearly, 425 00:22:35,480 --> 00:22:39,080 Speaker 1: the optimistic, the hopeful scenario is one in which everyone 426 00:22:39,080 --> 00:22:42,280 Speaker 1: accepts the legitimacy of the election, regardless of who wins. 427 00:22:42,280 --> 00:22:44,719 Speaker 1: If the president is re elected, we want people on 428 00:22:44,760 --> 00:22:47,400 Speaker 1: the political left to accept the legitimacy of his reelection, 429 00:22:47,600 --> 00:22:49,879 Speaker 1: and of course, if the president loses, we want his 430 00:22:49,920 --> 00:22:53,480 Speaker 1: supporters to accept the legitimacy of an income Biden administration. 431 00:22:53,680 --> 00:22:56,600 Speaker 1: But I think given the repeated attempts by the President 432 00:22:56,800 --> 00:22:59,800 Speaker 1: to cast doubt on the legitimacy of the election um 433 00:22:59,800 --> 00:23:02,359 Speaker 1: and the way in which he seems to be leaning 434 00:23:02,440 --> 00:23:06,959 Speaker 1: into divisive, inflammatory rhetoric, it would be foolish not to 435 00:23:07,000 --> 00:23:10,880 Speaker 1: take seriously the possibility that violence could ensue. If only 436 00:23:10,920 --> 00:23:12,919 Speaker 1: so we're on guard board, and so we make a 437 00:23:13,080 --> 00:23:15,879 Speaker 1: concerted effort to reach out to the people in our lives, 438 00:23:15,880 --> 00:23:19,399 Speaker 1: our friends, our family, and remind people of the importance 439 00:23:19,440 --> 00:23:23,000 Speaker 1: of respecting the outcomes of the election and of rebutting 440 00:23:23,000 --> 00:23:26,560 Speaker 1: the kind of disinformation that the President has been sewing 441 00:23:26,680 --> 00:23:30,480 Speaker 1: about the unreliability of mail in ballots, which really doesn't 442 00:23:30,520 --> 00:23:35,760 Speaker 1: have any serious basis in evidence. Jeffrey Howard, the Associate 443 00:23:35,800 --> 00:23:44,400 Speaker 1: Professor of Political theory at University College London. Right now, 444 00:23:44,440 --> 00:23:47,360 Speaker 1: we have an understanding that each house has its own character. 445 00:23:47,480 --> 00:23:52,640 Speaker 1: The legacy of Morgan Stanley is Stephen Roach literally modernizing 446 00:23:53,160 --> 00:23:56,800 Speaker 1: modern market economics through the digital through the idea of 447 00:23:56,880 --> 00:24:00,639 Speaker 1: actually publishing on retail sales. The moment it was done, 448 00:24:01,000 --> 00:24:04,080 Speaker 1: it was a miracle fifteen and twenty years ago. Carrying 449 00:24:04,080 --> 00:24:08,159 Speaker 1: that legacy for this chat Naya, he's Morgan Stanley, Chief Economist, 450 00:24:08,240 --> 00:24:11,720 Speaker 1: Global head of Economics and among other things, writing heard 451 00:24:12,160 --> 00:24:17,320 Speaker 1: on a wonderful group of economists worldwide, including Ellen Setner Shatan, 452 00:24:17,359 --> 00:24:19,840 Speaker 1: Thank you so much for joining us at this morning. 453 00:24:19,880 --> 00:24:22,800 Speaker 1: You see retail sales with a nice abdard. Are we 454 00:24:22,880 --> 00:24:27,719 Speaker 1: miss judging Q four and Q one worldwide where they 455 00:24:27,720 --> 00:24:33,479 Speaker 1: could actually outperform the caution That's what we have been 456 00:24:33,520 --> 00:24:36,000 Speaker 1: actually highlighting. As you know, we've been making this call 457 00:24:36,080 --> 00:24:38,920 Speaker 1: that we will see this reshape recovery, and the data 458 00:24:39,040 --> 00:24:41,680 Speaker 1: just continues to confirm that we are on that path 459 00:24:42,200 --> 00:24:45,680 Speaker 1: and there is no stalling, especially for US and China, 460 00:24:45,760 --> 00:24:47,840 Speaker 1: which are the two big parts of the world. The 461 00:24:48,040 --> 00:24:50,560 Speaker 1: data continues to surprise on the up side, and we're 462 00:24:50,600 --> 00:24:53,040 Speaker 1: expecting something similar out of China when we get the 463 00:24:53,080 --> 00:24:56,480 Speaker 1: GDP data on Monday. How much does the increase in 464 00:24:56,600 --> 00:25:01,960 Speaker 1: virus cases challenge your assumption of a v shaped recovery. Look, 465 00:25:02,000 --> 00:25:04,720 Speaker 1: I think I've mentioned this on this show before, that 466 00:25:04,760 --> 00:25:07,520 Speaker 1: what we have been highlighting is that the equation between 467 00:25:07,680 --> 00:25:11,000 Speaker 1: virus and the economy is changing. So as we keep 468 00:25:11,040 --> 00:25:15,080 Speaker 1: seeing this new cases rising again, we have to temper 469 00:25:15,160 --> 00:25:18,640 Speaker 1: down the expectation of its impact on the economy. We've 470 00:25:18,640 --> 00:25:21,399 Speaker 1: been of the view that growth will moderate in the 471 00:25:21,480 --> 00:25:24,360 Speaker 1: next three months, but it will still continue to make 472 00:25:24,400 --> 00:25:27,359 Speaker 1: progress towards that we shap recall that we had made, 473 00:25:27,720 --> 00:25:30,000 Speaker 1: which is that we will see that US economy will 474 00:25:30,040 --> 00:25:33,480 Speaker 1: reach pre COVID levels by second quarter of twenty one. 475 00:25:33,600 --> 00:25:36,439 Speaker 1: And just look at today's retail sales data if you 476 00:25:36,520 --> 00:25:38,840 Speaker 1: kind of try and do some backward maths on where 477 00:25:38,840 --> 00:25:42,120 Speaker 1: it will take the personal consumption spending number, the person 478 00:25:42,200 --> 00:25:46,520 Speaker 1: consumption spending number could be as much as nine of 479 00:25:46,760 --> 00:25:50,840 Speaker 1: pre COVID levels by end of September, and that just 480 00:25:50,880 --> 00:25:53,760 Speaker 1: tells you that how much progress we have made so far, 481 00:25:53,920 --> 00:25:57,760 Speaker 1: So the v SHAP recovery path looks very much secure. 482 00:25:58,080 --> 00:26:01,679 Speaker 1: Well okay, but this is all predicated on this idea 483 00:26:01,880 --> 00:26:04,760 Speaker 1: that the balance sheet of homes have been bolstered by 484 00:26:04,960 --> 00:26:07,560 Speaker 1: the stimulus that we'd already gotten from Washington, d C. 485 00:26:07,800 --> 00:26:10,040 Speaker 1: If we don't get that re upt how many more 486 00:26:10,119 --> 00:26:15,040 Speaker 1: months can consumers continue to sustain the recovery. Well, that's 487 00:26:15,200 --> 00:26:17,640 Speaker 1: a very good question. So what we have been highlighting 488 00:26:17,760 --> 00:26:21,600 Speaker 1: is that the underlying strength of the consumer balance sheet 489 00:26:21,640 --> 00:26:25,040 Speaker 1: as well as income standing, has been quite good. So, 490 00:26:25,119 --> 00:26:28,159 Speaker 1: for example, personal income as of August, and this is 491 00:26:28,160 --> 00:26:30,679 Speaker 1: not for September, but as of August, personal income for 492 00:26:30,760 --> 00:26:34,760 Speaker 1: household is already about my big COVID levels by two 493 00:26:35,800 --> 00:26:39,040 Speaker 1: And the excess savings stock that the consumers have built 494 00:26:39,160 --> 00:26:41,720 Speaker 1: in the last five months because of the stimulus and 495 00:26:41,760 --> 00:26:44,399 Speaker 1: the fact they couldn't spend in the initial months is 496 00:26:44,480 --> 00:26:48,200 Speaker 1: one point one trillion dollars. So the consumers have enough 497 00:26:48,320 --> 00:26:53,760 Speaker 1: room to continue they're spending into this winter months. Chilling. 498 00:26:53,760 --> 00:26:56,240 Speaker 1: You've been very bold and quite published on the economy, 499 00:26:56,359 --> 00:26:58,320 Speaker 1: and you've been an outlier and Morgan Stanley have led 500 00:26:58,320 --> 00:27:01,000 Speaker 1: that call over the last several months, coming out of 501 00:27:01,080 --> 00:27:04,960 Speaker 1: that huge contraction earlier this year. Every economic house though, 502 00:27:05,040 --> 00:27:08,359 Speaker 1: looks at their called their base case and acknowledge is 503 00:27:08,400 --> 00:27:11,560 Speaker 1: a key vulnerability in their forecast. What is it for you, 504 00:27:11,680 --> 00:27:16,399 Speaker 1: Chettam right now? Well, I think the key vulnerability is 505 00:27:16,520 --> 00:27:22,040 Speaker 1: essentially the new cases. If they force aggressive shutdown, that 506 00:27:22,080 --> 00:27:24,879 Speaker 1: will be the rest to our podcast. I think the 507 00:27:25,000 --> 00:27:28,160 Speaker 1: stimulus is less of a risk because of the math 508 00:27:28,240 --> 00:27:31,199 Speaker 1: that I mentioned to you on the household strength, but 509 00:27:31,280 --> 00:27:34,240 Speaker 1: it's really this rise in new cases. If they really 510 00:27:34,320 --> 00:27:37,600 Speaker 1: forced aggressive shutdown, that would be the near term risk. 511 00:27:37,920 --> 00:27:40,000 Speaker 1: But again that's going to be a short term risk 512 00:27:40,040 --> 00:27:43,679 Speaker 1: because as we head into a spring, we should again 513 00:27:43,920 --> 00:27:47,600 Speaker 1: get an environment where virus itself begins to dissiplinate it. 514 00:27:49,040 --> 00:27:50,480 Speaker 1: What do you think about the question that what is 515 00:27:50,480 --> 00:27:56,600 Speaker 1: playing out in Europe right now is in America's future well, 516 00:27:56,640 --> 00:28:00,960 Speaker 1: in terms of the virus cases, Yeah, Look, I think 517 00:28:01,400 --> 00:28:04,679 Speaker 1: europe situation is very similar to what you saw in 518 00:28:04,760 --> 00:28:08,159 Speaker 1: the US in June July. You are seeing ukses rising, 519 00:28:08,840 --> 00:28:12,560 Speaker 1: hospitalizations are not rising in the same strength, and what 520 00:28:12,600 --> 00:28:15,879 Speaker 1: you're seeing policymakers is taking a more pragmatic approach of 521 00:28:15,960 --> 00:28:18,680 Speaker 1: not shutting down the economy across the board. I mean, 522 00:28:18,720 --> 00:28:21,440 Speaker 1: if you just look at the actual facts of how 523 00:28:21,520 --> 00:28:25,120 Speaker 1: much restrictions they have imposed, they're not really shut down 524 00:28:25,200 --> 00:28:29,040 Speaker 1: restaurants all through. They've just decided to shut down restaurants 525 00:28:29,119 --> 00:28:31,680 Speaker 1: late in the evening. So that just tells you that 526 00:28:31,680 --> 00:28:33,720 Speaker 1: that point that I was making to you earlier, that 527 00:28:33,800 --> 00:28:37,919 Speaker 1: the equation between virus and the economy is changing. So 528 00:28:38,000 --> 00:28:41,160 Speaker 1: you think the recovery can continue even as cases built, 529 00:28:41,200 --> 00:28:44,400 Speaker 1: because this would also imply chat and the consumers don't disengage, 530 00:28:44,760 --> 00:28:49,120 Speaker 1: the companies don't lose confidence. Yeah, that's right, and I 531 00:28:49,120 --> 00:28:51,160 Speaker 1: think at least in the US, we saw that that 532 00:28:51,200 --> 00:28:54,160 Speaker 1: did not happen in June July, so we're more confident 533 00:28:54,240 --> 00:28:58,360 Speaker 1: of the US. In Europe you could see some confidence impact. 534 00:28:59,160 --> 00:29:01,720 Speaker 1: But look, as of now what we have isn't in 535 00:29:01,800 --> 00:29:04,200 Speaker 1: the data, is not showing any big dent in the 536 00:29:04,240 --> 00:29:08,080 Speaker 1: European economic numbers too. The most important number I look 537 00:29:08,120 --> 00:29:11,480 Speaker 1: at is the restaurant activity um sorect to restaurant activity 538 00:29:11,480 --> 00:29:13,760 Speaker 1: in Europe. For the data for the country that we have, 539 00:29:13,920 --> 00:29:17,400 Speaker 1: Germany and UK had picked up a lot, but they're 540 00:29:17,440 --> 00:29:20,320 Speaker 1: still back to like hundred percent levels, so they're not 541 00:29:20,400 --> 00:29:24,560 Speaker 1: really showing a huge decline in retail activity in terms 542 00:29:24,560 --> 00:29:28,600 Speaker 1: of restaurants spending, cheting. Great to catch up as always 543 00:29:29,000 --> 00:29:31,800 Speaker 1: and what a cold so far is not over yet 544 00:29:31,800 --> 00:29:34,520 Speaker 1: but it's looking good. Chat and I Morgan Stanley, chief 545 00:29:34,520 --> 00:29:37,840 Speaker 1: Economist and Global Ahead of Economics, working alongside at the 546 00:29:37,920 --> 00:29:40,920 Speaker 1: Center of course, the chief US Economist. Thanks for listening 547 00:29:41,000 --> 00:29:45,520 Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews 548 00:29:45,560 --> 00:29:50,800 Speaker 1: on Apple podcast, SoundCloud, or whichever podcast platform you prefer. 549 00:29:51,360 --> 00:29:54,720 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 550 00:29:54,720 --> 00:30:04,320 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio