Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily
Speaker 1: we bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
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Speaker 1: now an update, but it can be an update about
Speaker 1: Washington as well. From Buffalo and from Albany and from
Speaker 1: New York City, Kathy Hock joins the Lieutenant Governor of
Speaker 1: the Empire State. Kathy, I want to go right to
Speaker 1: the stimulus and the great contention that aid is necessary
Speaker 1: for states, cities, and towns, and there's a debate about this.
Speaker 1: The only thing that's going to catalyze that are furloughs
Speaker 1: in layoffs. How close are you and Governor Cuomo to
Speaker 1: furloughs and layoffs? Well, first, thanks for having me on
Speaker 1: the show, but let me first address even why there's
Speaker 1: even debate as to whether that we need stimulus. I
Speaker 1: don't understand how anyone would conclude that we cannot survive
Speaker 1: without a stimulus package. Here's why we never anticipated having
Speaker 1: to deal with the global pandemic when our budget was
Speaker 1: put together. Not New York, not any other state in
Speaker 1: the nation. We have incurred extraordinary expenses. We've had a
Speaker 1: huge hit to our sales tax revenues. Income taxes are
Speaker 1: going to be plumbering. So all of our traditional revenue
Speaker 1: sources are not there for us in the way that
Speaker 1: we have projected them to be. So we will need
Speaker 1: this stimulus plan. It's not debatable. New York State cannot
Speaker 1: be left on its own. This is a national crisis,
Speaker 1: a federal disaster, and if we had real leadership out
Speaker 1: of Washington, they would understand that. Fortunately, the Democrats in
Speaker 1: the House understand it, Chuck where understand that, but we're
Speaker 1: not getting the support we need and they were going
Speaker 1: to suffer. We should state to our global audience at
Speaker 1: the persuasion of the lieutenant governors towards the Bocracy and
Speaker 1: Mr Biden and the Democratic Party, can you wait out
Speaker 1: to an inauguration? Can you wait out to a President Biden?
Speaker 1: Can you get that far without furloughs and layoffs. I
Speaker 1: don't have a projection on that at this point. We
Speaker 1: have been going, you know, day to day, trying to
Speaker 1: back Back in May, we had a plan passed by
Speaker 1: the House that we thought could really address our needs.
Speaker 1: We're asking for five billion dollars for states and local governments.
Speaker 1: And that's not just the fund government operations. We're talking
Speaker 1: about funding the health care workers, funding teachers, funding first responders,
Speaker 1: funding critical programs, infrastructure. So this is these are all
Speaker 1: the functions of government that have been direly affected because
Speaker 1: of the loss of money coming in that we had
Speaker 1: expected to be there this year. So we need this help.
Speaker 1: Can we wait till Biden President? I don't know that
Speaker 1: we'll have much choice, but hope springs eternal. I know
Speaker 1: there's conversations uh with Secretary Treasumunution Lead Speaker Alsie, and
Speaker 1: we hope that common sensal reign and they'll say, you
Speaker 1: know what, we cannot leave these states to starve and
Speaker 1: if not good for them politically, either lieutenant governor more locally.
Speaker 1: There's been a lot written about the power struggle between
Speaker 1: Governor Cuomo and Mayor du Blasio of New York City.
Speaker 1: Does Governor Cuomo see di Blasio as part of the
Speaker 1: problem or part of the solution at this point? Well,
Speaker 1: you'd have to ask Governor Cuomo how we've used that relationships.
Speaker 1: But I do know that we work with our local partners.
Speaker 1: There's a lot of collaboration that goes on behind the
Speaker 1: scenes that does not make the headlines. And uh, you know,
Speaker 1: we need each other in this and but also you know,
Speaker 1: just the recognition that it is the state that has
Speaker 1: the ultimate decision as to whether or not, you know,
Speaker 1: when and how you shut down during a pandemic, and
Speaker 1: the same thing with when we reopen. And you know,
Speaker 1: lately it's been referred to, you know, the hotspots and
Speaker 1: how the governor had to step in to fill the
Speaker 1: void because we're seeing areas of the state and specific
Speaker 1: neighborhoods where the infection rate went up to five six seven.
Speaker 1: That's not acceptable. The rest of the state today is
Speaker 1: at one percent, and we cannot risk our recovery and
Speaker 1: getting our economy back on all cylinders by having hotspots
Speaker 1: because the issues weren't addressed early enough and in a
Speaker 1: in a smart way, so the state has had to
Speaker 1: step in. Kathy, there's also a question about quality of
Speaker 1: life concerns. There's a question about trash collection given some
Speaker 1: of the budget cuts, and there's very much a question
Speaker 1: about making sure that the uptick in crime does not continue.
Speaker 1: As an anecdote, there were helicopters over my building last night.
Speaker 1: In general, it's not dangerous, but there was a shooting
Speaker 1: more than ten blocks away. What are you guys doing
Speaker 1: on that front now? And certainly that's all very unsettling
Speaker 1: for the New Yorkers who stayed in The vast majority
Speaker 1: did stay and they're weathering this out, and they also
Speaker 1: know we've been through a lot before and we will
Speaker 1: get through this. But in the day to day life
Speaker 1: for people like yourselves and others, it's tough. But I
Speaker 1: get back to Washington here. You want more money for
Speaker 1: law enforcement, you want money for trash pick up. You
Speaker 1: cannot starve the cities in the while expecting those services
Speaker 1: to continue. The City of New York will have less
Speaker 1: money to work with to fund those essential services than
Speaker 1: they have predicted, and that money has to be replenished
Speaker 1: by the federal government. Do you see, Cathy, a change
Speaker 1: towards a more ecumenical, are more compromising two parties over
Speaker 1: the next number of years or is there a permanence
Speaker 1: to these rigidities between Washington and the Democrat Party states
Speaker 1: With President Trump? Is there a permanence to that theme
Speaker 1: or do you revert back to something more collegial it
Speaker 1: reverts back. And I'll tell you why. I have been
Speaker 1: a student of history. I'm old enough to have watched
Speaker 1: the Watergate hearing that a kid, you know, watched a
Speaker 1: gavel to gavel. I knew all the players like they're
Speaker 1: part of my family. So I thought that our democracy
Speaker 1: was imperiled back when I was just a teenager. And
Speaker 1: I have seen the resiliency of this country. I have
Speaker 1: seen that, yes, we can go to extremes. There were
Speaker 1: nineteen six eight was a very tough year in our
Speaker 1: nation and people, you know, cities were burnings. Remember being
Speaker 1: a little kid going to visit Washington and seeing it
Speaker 1: burning and the protests and what people was, what was happening,
Speaker 1: you know, the division over the Vietnam War that divided
Speaker 1: family against family. But we always swing back, the pendulum
Speaker 1: swings back toward normalcy in the middle. And right now
Speaker 1: we have a cult of personality around one individual. I
Speaker 1: don't think that would have been the case if someone,
Speaker 1: you know, let's say, Admit Romney or someone had been
Speaker 1: elected instead of Donald Trumpets. So I think this is
Speaker 1: all related to an individual who has promoted himself to
Speaker 1: attract individuals who are extremists. That is going to go
Speaker 1: back into the bottle and back underground where it belongs
Speaker 1: when we have Joe Biden as president. But also he
Speaker 1: understands we have to have relationships with Republicans and that's
Speaker 1: how the two party system will continue to thrive in
Speaker 1: our country. Still got an election to God, that election underway,
Speaker 1: that result a little more than two weeks away. Kathy,
Speaker 1: thanks for coming on the program, Kathy how New York
Speaker 1: Lieutenant governor. Thank you very much. John. We've got to
Speaker 1: go on to more important things here because with James
Speaker 1: Anthy of Everdeen Standard, we can dive into the investment
Speaker 1: space and talk a lot about it. But right now,
Speaker 1: I mean Prime Minister Johnson, pandemic, Prime Minister Johnson Brexit.
Speaker 1: Of course, we're looking at the race here and I'm sorry, James.
Speaker 1: All eyes are on Sunday. I mean John and I
Speaker 1: have been going back and forth on this and all
Speaker 1: eyes on Sunday is for the Todds. Gareth Bale is
Speaker 1: gonna come back. What's it gonna mean for Tottenham? I
Speaker 1: think we've just put together the best front three and
Speaker 1: world football, so I'm pretty excited. As his first fan
Speaker 1: myself I'm looking forward to gold s galore. I mean, John,
Speaker 1: are your eyes all on Sunday? My eyes are on Saturday,
Speaker 1: As he sighed, Darthy, Liverpool Everton just gonna be fiery.
Speaker 1: We got that shut down too. This is a big
Speaker 1: we done that. Can we move on? Yeah? I mean,
Speaker 1: I don't know what I'm talking about, but James is right,
Speaker 1: this is a huge deal for the two minutes ago.
Speaker 1: I get this shows guys coming from space or whatever
Speaker 1: the pharaoh's golf stream up to England to help the chart.
Speaker 1: So they'll do that on Sunday. Okay, under the markets
Speaker 1: right now, James, ain't you with us? With everything? Stander? James,
Speaker 1: things have changed. How do you structure? How do you
Speaker 1: have a strategic investment plan for Q one two thousand one? Yeah?
Speaker 1: With great difficulty, because you've got obviously a huge, well known,
Speaker 1: well advertised risk event where I think there are genuinely
Speaker 1: probably three possible outcomes which have relatively high likelihood each
Speaker 1: of them. Um and probably the world looks looks somewhat,
Speaker 1: if not vastly different further down the line depending on
Speaker 1: the outcome. Then obviously I'm talking about US election. I
Speaker 1: think it's very difficult to see the House switching back
Speaker 1: to the Republicans, so you're talking about Biden verse is
Speaker 1: Trump and then does the Senate switch to the Democrats?
Speaker 1: And you know, if it's a split Congress, I don't
Speaker 1: think that's great for for risk you know, whoever's in
Speaker 1: the White House. But if if, if, if there is
Speaker 1: a blue wave of blue sweet, whatever you want to
Speaker 1: call it, I think the market wants to run with
Speaker 1: that as being gross inflation, reflation bad for treasuries. And
Speaker 1: that's a very different world to something where risk assets
Speaker 1: have to price that out, have a bit of a
Speaker 1: wobble and treasuries rally. So truly looking through that event,
Speaker 1: it's very difficult. We're in such a such a difficult
Speaker 1: strategic macro environment anyway, in my opinion, there is you know,
Speaker 1: we've seen huge, huge holes blown in global economies and
Speaker 1: now we're trying to patch them up, and and real
Speaker 1: time data is is not a huge use in guiding
Speaker 1: you as to what the medium term trajectory is. So
Speaker 1: huge uncertainty, very difficult, James, I just don't know how
Speaker 1: you invest around this. Going into year end, you've gone
Speaker 1: through all the different outcomes we could get from the election.
Speaker 1: The difference between a blue wave and a divided government
Speaker 1: could be too trillion dollars in stimulus. How do you
Speaker 1: invest around that? James, Yeah, it's difficult. I mean two
Speaker 1: trillion dollars in stimulus today as we sit here, it
Speaker 1: feels kind of like a small number. That's how crazy
Speaker 1: things have got. As I say it is, It is
Speaker 1: difficult because you have bimodal sort of scenario. You have
Speaker 1: two very different outcomes and a reasonably close probability between
Speaker 1: the two. So I think we're going to be running
Speaker 1: a lot less risk into that risk event. Then we're
Speaker 1: running at the moment for exactly that reason. I don't
Speaker 1: you know, if I were to game in our probability
Speaker 1: adjust the outcomes, you get something that looks quite neutral,
Speaker 1: because there's a reasonable chance of something going up on
Speaker 1: a reasonable chance of they're going down. I do think
Speaker 1: there are still a few places that you can feel
Speaker 1: somewhat comfortable having a position. But I don't think, you know,
Speaker 1: the FEDS policy is going to be changed in any way,
Speaker 1: shape or formed by the outcome, And so if you
Speaker 1: want to hunker down in five year treasuries, maybe even
Speaker 1: a little bit further out. I don't think you're going
Speaker 1: to see a huge amount of volatility there um. But
Speaker 1: but you know, other than that, it's difficult to have
Speaker 1: a strategic view as we sit here, and I think
Speaker 1: there's technical things like I kind of want to talk
Speaker 1: about stuff, some of the technical stuff that was going on,
Speaker 1: I don't. You know, we don't use options heavily, and
Speaker 1: I'm not a massive sort of options expert or what
Speaker 1: have you, but we've still got this massive situation where
Speaker 1: huge option buying is going on in ecuty markets, in
Speaker 1: the market general and single name tech tech stocks, and
Speaker 1: we have option expiry today, and therefore the gamma that
Speaker 1: you get from from those options getting closer to out
Speaker 1: the money and then further away from out the money.
Speaker 1: You know, these are the things I think which are
Speaker 1: actually driving markets a lot more than the macro environment
Speaker 1: on a day to day basis. And that's something that
Speaker 1: can be both an opportunity and a huge risk. So James,
Speaker 1: can you quantify how much you've wrote down risk, how
Speaker 1: much you've gone into five Your treasury is to hunker
Speaker 1: down and prepared to be liquid and nimble when things change.
Speaker 1: I mean, that's a process that's not something that we're
Speaker 1: you know that we've done a huge amount of at
Speaker 1: this stage because we're still reasonably far from the election.
Speaker 1: And to be honest, you know where if you look
Speaker 1: at polling experts, if I were to just pick five
Speaker 1: thirty eight and say that's somewhat symptomatic of broadly speaking
Speaker 1: the polling experts for you, you know that that's suggesting
Speaker 1: Biden has roughly a chance of winning the White House
Speaker 1: and maybe the Senate has a chance of switching over
Speaker 1: to the Democrats. Obviously, those two probabilities are closely connected.
Speaker 1: You can't see the chances of the Dems switch in
Speaker 1: the Senate going up without Biden's chances going up. I
Speaker 1: look at eighty five, and I say, in a two
Speaker 1: horse race this far out, with the polling's problems, shall
Speaker 1: we say that we've had in the last two elections
Speaker 1: where actually, you know, Romney was leading at this stage,
Speaker 1: in Clinton was leading at this stage, and neither of
Speaker 1: those one that looks to me like that's overpriced. So
Speaker 1: we're happy to oppose that for now because it looks
Speaker 1: like too much a probability of Biden, and by extension,
Speaker 1: a blue wave has been priced into the market. And
Speaker 1: we expect other investors to de risk going into the election,
Speaker 1: and that's likely to be there for the most heavily
Speaker 1: positioned assets which see some unwind and risk assets definitely
Speaker 1: fits the bill. Big tech definitely fits the bill. So
Speaker 1: you know we're positioned in opposition to that for now,
Speaker 1: and we will look for opportunities to just take the
Speaker 1: overall risk level down quite considerably, to be honest, into
Speaker 1: the risk of vent itself. James Covery is for a second,
Speaker 1: I'm going to talk about the B word. Here's a
Speaker 1: covered Brexit cable turning around one nine un changed on
Speaker 1: the session. The Prime Minister about forty minutes ago basically
Speaker 1: signal think he's ready to walk away from negotiations. And
Speaker 1: guess what an EU official thinks. According to our reporting,
Speaker 1: the EU expecting Brexit talks to continue with the United
Speaker 1: Kingdom next week. Tom, we talked about this, the posturing
Speaker 1: around this story. It's a prime minister trying to put
Speaker 1: some pressure on the EU. I'm not sure the European
Speaker 1: Union feels it right now, and Sterling is capturing that story. Okay,
Speaker 1: it's a game of blood. But John, I remember you
Speaker 1: planted in the chair the first morning after Brexit. What's changed?
Speaker 1: I mean, I don't understand what's changed from that moment
Speaker 1: when you were on our old set over in Finsbury
Speaker 1: Square talking about Brexit versus where we are right now.
Speaker 1: I know what's really changed in the power game between
Speaker 1: these two parties, two prime ministers and not much house.
Speaker 1: That's what's changed before and a half years, James fe
Speaker 1: how on earth do you trade this one? And for
Speaker 1: me around the negotiations, how do you know what is
Speaker 1: real negotiation and what is just posturing? Yeah, really good question,
Speaker 1: really difficult questions. Some of this comes from just the
Speaker 1: nature of negotiating as the EU or with the EU,
Speaker 1: you're talking about twenty odd countries that have to compromise
Speaker 1: with each other just to get to an EU position.
Speaker 1: And then obviously if there's somebody on the other side
Speaker 1: of the table, they've got their own views about what prioritizing,
Speaker 1: what they can sacrifice, and therefore as an incredibly complex negotiation.
Speaker 1: I would just agree broadly with the idea that for
Speaker 1: possibly not as long as as going back to sixteen,
Speaker 1: but certainly for the last twelve months, nothing really has
Speaker 1: changed both sides of talking past each other. This is
Speaker 1: a game of chicken. The politics has changed dramatically in
Speaker 1: the UK such that their view of how to negotiate
Speaker 1: has changed dramatically, and therefore it's a more robust, more
Speaker 1: politically supported, shall we say, hard and negotiating position. No
Speaker 1: deal is better than a bad deal on the EU side,
Speaker 1: I don't think they're quite there, but again, the political
Speaker 1: reality of the negotiations is that doing a deal where
Speaker 1: the compromises necessary in advance of an absolute drop dead
Speaker 1: deadline is an unsatisfactory political outcome because you can't then
Speaker 1: go back to domestic audiences who you might have had
Speaker 1: to sacrifice a little bit to get the deal over
Speaker 1: the line and say you fought as hard as you
Speaker 1: possibly could. So it has to go to the wire.
Speaker 1: You have to dangle people over the edge, make them
Speaker 1: look into the abyss, and that's then and only then
Speaker 1: will you get some sort of compromise that the headlines
Speaker 1: you described today, I mean that tells you all you
Speaker 1: need to know in terms of how you invest. I
Speaker 1: think you can be long guilts because I don't think
Speaker 1: there's a huge sell off in the guilt market if
Speaker 1: there is a deal. I think that you know the
Speaker 1: economic situation the virus situation, the global duration situation more
Speaker 1: broadly is supportive for owning guilts. You know, we're tactically
Speaker 1: short sterling, as we've talked about before. One observation from
Speaker 1: today it's a bit disappointing for me as somebody who
Speaker 1: is short sterling on a tactical basis. The downside to
Speaker 1: cable when that first headline hit was relatively small and
Speaker 1: quickly reversed. But then when you get a positive headline
Speaker 1: on the other side, the market wants to run with that.
Speaker 1: So I still think there is a sentiment um sort
Speaker 1: of asymmetry that the market really isn't prepared to believe
Speaker 1: that the UK will walk away, which means actually short
Speaker 1: sterling increasingly looks like a position that is will only
Speaker 1: really benefit on the outcome if we are December thirty
Speaker 1: one have walked away and there is no deal, So
Speaker 1: that that changes the dynamics a little bit. And that's
Speaker 1: that something I've been observing more recently. But again I
Speaker 1: don't think you can have high conviction. I would make
Speaker 1: it fifty fifty that we either get a deal of
Speaker 1: some sort or all. We don't. I don't know what
Speaker 1: you can have our conviction on at all right now, James,
Speaker 1: great to catch up, Sir James Athley talks about there
Speaker 1: right now. It is the advantage if you were a
Speaker 1: successful a hundred years ago. There was Lever Brothers and
Speaker 1: then Uni Lever and all the rest of that. There
Speaker 1: is a trust of the Lever family and Jeffrey Howard
Speaker 1: at University College London is writing new books thinking about
Speaker 1: our dangerous dialogue are dangerous discourse in politics? Were thrilled
Speaker 1: that Professor Howard could join us. Uh, this morning, You've
Speaker 1: got a new book coming out, Jeffrey Howard on dangerous discussion?
Speaker 1: Is that what we observed last night? Well, I think
Speaker 1: we observed quite a bit of it last night. It
Speaker 1: was a quite striking moment, I think when Savannah Guthrie
Speaker 1: was pressing the President of the United States about whether
Speaker 1: he would disown this extremely fringe conspiracy theory known as
Speaker 1: Q and on one that alleges that top Democrats are
Speaker 1: inco hoots with pedophiles and sex traffickers, and that Donald
Speaker 1: Trump is really a secret agent aiming to save the
Speaker 1: world from these nefarious villains. And of course Trump wouldn't
Speaker 1: disown it. In fact, he claimed that he didn't know
Speaker 1: anything about it before then jumping in and say, oh,
Speaker 1: but there against pedophiles and that's a good thing. Clearly
Speaker 1: he's lying. Clearly he knows quite a bit about it.
Speaker 1: Doesn't mean I mean, Professor Howard. What's important here is
Speaker 1: Lisa Bramwints and John Farroll get the love notes. I've
Speaker 1: gotten the hate mail, and I've already gotten hate mail
Speaker 1: this morning from Trump supporters who separate his discourse from
Speaker 1: policy and from what they believe are the attributes they
Speaker 1: can vote for. Is that appropriate? Is that going to
Speaker 1: be something new to American politics? Look, we're going to
Speaker 1: the polls. It's always a lesser evil justification, right, and
Speaker 1: we never have candidates that line perfectly with our deepest values.
Speaker 1: And of course, sometimes it would be appropriate to support
Speaker 1: someone even though you disagreed with their language or their rhetoric,
Speaker 1: if you thought they were good in terms of the
Speaker 1: content they delivered for the country. The problem with the president, however,
Speaker 1: is that his language actually does have consequences. It has
Speaker 1: implications for the kind of country we're living in, for
Speaker 1: the coarseness of public dialogue, and as we get closer
Speaker 1: to the election, I think it's very reasonable to worry
Speaker 1: about the ways in which his unhinged rhetoric might, in
Speaker 1: some occasions leads to violence. In the town hall last night,
Speaker 1: he again mentioned Governor Gretchen Whitmer of Michigan by name,
Speaker 1: despite the attack, the plot by militia terrorists to Kidnapperr
Speaker 1: only recently. And I think we need to be extremely
Speaker 1: alarmed about that. And people who say, don't worry about
Speaker 1: the language, it doesn't make a difference, you need to
Speaker 1: realize that sometimes it does make a difference. Professor. Let's
Speaker 1: talk about the polls right now where the president is
Speaker 1: really struggling several demographics, including an older demographic, particularly in Florida,
Speaker 1: which is a huge change from four years ago, at
Speaker 1: suburban females as well. How can you make inroads into
Speaker 1: those demographics with a little more than two weeks to go. Well,
Speaker 1: there's not a lot of time, and Trump is spending
Speaker 1: time in places that he traditionally or Republican candidates traditionally
Speaker 1: wouldn't have to be spending time in places like Georgia.
Speaker 1: So I think it's I'd be extremely alarmed if I
Speaker 1: was inside the Trump campaign right now. Um. Now, it's
Speaker 1: easy to look at the national polls and say that
Speaker 1: Biden's got it in the bag. But of course we
Speaker 1: need to remember that in the swing states it's still
Speaker 1: pretty closed and anything could happen. So that's why I
Speaker 1: think Biden is being very true to spend time in
Speaker 1: places like Pennsylvania making sure that he's making those conversations
Speaker 1: and contacts with the kind of suburban women voters that
Speaker 1: Trump has been a lot to turn off in the
Speaker 1: last few years, and certainly they showed up in droves
Speaker 1: at the polls during the mid terms to repudiate Trump,
Speaker 1: and it seems overwhelmingly likely that that will happen again.
Speaker 1: Just the other night, Trump directly appealed to suburban women,
Speaker 1: saying that it's really important that they like him, but
Speaker 1: he didn't proceed to give any compelling argument about why
Speaker 1: they could support a Trump administration. And that's problem, although
Speaker 1: in fairness, he was doing that a little bit uh
Speaker 1: in a self deprecating way. But Jeffrey, let's look forward
Speaker 1: the idea that perhaps the polls are not vastly wrong
Speaker 1: and Joe Biden does in the election. What happens after that,
Speaker 1: in the months before January, when there is a transition
Speaker 1: of power, how messy, could things get well? I think
Speaker 1: that there are a number of different scenarios that might
Speaker 1: play out. One kind of scenario, of course, is the
Speaker 1: president continuing to capt doubt on the validity of the election,
Speaker 1: but it actually not making a difference to what ultimately
Speaker 1: transpires in January. It's entirely conceivable that Trump will continue
Speaker 1: to um degrade the legitimacy of the election without any
Speaker 1: intention of actually trying to stay in office. This could
Speaker 1: be simply a way of keeping its supporters with him
Speaker 1: in January as he looks ahead to perhaps set up
Speaker 1: a Trump TV station, so he retains a sizable portion
Speaker 1: of the electorate who stays on his side and is
Speaker 1: willing to to watch his television programs. But that's I
Speaker 1: think the most optimistic projection. I think it seems at
Speaker 1: least conceivable that he could inspire his supporters to go
Speaker 1: into the streets to engage in violence. We could imagine
Speaker 1: Trump supporters um making a big scene about the election
Speaker 1: in the streets where who knows left wing counter protesters
Speaker 1: show up uh to agitate against those Trump supporters, and
Speaker 1: that really would be a powder kig that would could
Speaker 1: be extremely extremely supporting stop that's really inflammator. Are you
Speaker 1: predicting that we could see that kind of response from
Speaker 1: people or in this nation? Do we move on in
Speaker 1: a more peaceable way? Oh? So, the cast when we're
Speaker 1: being for cautious is to play out all the different scenarios. Now, clearly,
Speaker 1: the optimistic, the hopeful scenario is one in which everyone
Speaker 1: accepts the legitimacy of the election, regardless of who wins.
Speaker 1: If the president is re elected, we want people on
Speaker 1: the political left to accept the legitimacy of his reelection,
Speaker 1: and of course, if the president loses, we want his
Speaker 1: supporters to accept the legitimacy of an income Biden administration.
Speaker 1: But I think given the repeated attempts by the President
Speaker 1: to cast doubt on the legitimacy of the election um
Speaker 1: and the way in which he seems to be leaning
Speaker 1: into divisive, inflammatory rhetoric, it would be foolish not to
Speaker 1: take seriously the possibility that violence could ensue. If only
Speaker 1: so we're on guard board, and so we make a
Speaker 1: concerted effort to reach out to the people in our lives,
Speaker 1: our friends, our family, and remind people of the importance
Speaker 1: of respecting the outcomes of the election and of rebutting
Speaker 1: the kind of disinformation that the President has been sewing
Speaker 1: about the unreliability of mail in ballots, which really doesn't
Speaker 1: have any serious basis in evidence. Jeffrey Howard, the Associate
Speaker 1: Professor of Political theory at University College London. Right now,
Speaker 1: we have an understanding that each house has its own character.
Speaker 1: The legacy of Morgan Stanley is Stephen Roach literally modernizing
Speaker 1: modern market economics through the digital through the idea of
Speaker 1: actually publishing on retail sales. The moment it was done,
Speaker 1: it was a miracle fifteen and twenty years ago. Carrying
Speaker 1: that legacy for this chat Naya, he's Morgan Stanley, Chief Economist,
Speaker 1: Global head of Economics and among other things, writing heard
Speaker 1: on a wonderful group of economists worldwide, including Ellen Setner Shatan,
Speaker 1: Thank you so much for joining us at this morning.
Speaker 1: You see retail sales with a nice abdard. Are we
Speaker 1: miss judging Q four and Q one worldwide where they
Speaker 1: could actually outperform the caution That's what we have been
Speaker 1: actually highlighting. As you know, we've been making this call
Speaker 1: that we will see this reshape recovery, and the data
Speaker 1: just continues to confirm that we are on that path
Speaker 1: and there is no stalling, especially for US and China,
Speaker 1: which are the two big parts of the world. The
Speaker 1: data continues to surprise on the up side, and we're
Speaker 1: expecting something similar out of China when we get the
Speaker 1: GDP data on Monday. How much does the increase in
Speaker 1: virus cases challenge your assumption of a v shaped recovery. Look,
Speaker 1: I think I've mentioned this on this show before, that
Speaker 1: what we have been highlighting is that the equation between
Speaker 1: virus and the economy is changing. So as we keep
Speaker 1: seeing this new cases rising again, we have to temper
Speaker 1: down the expectation of its impact on the economy. We've
Speaker 1: been of the view that growth will moderate in the
Speaker 1: next three months, but it will still continue to make
Speaker 1: progress towards that we shap recall that we had made,
Speaker 1: which is that we will see that US economy will
Speaker 1: reach pre COVID levels by second quarter of twenty one.
Speaker 1: And just look at today's retail sales data if you
Speaker 1: kind of try and do some backward maths on where
Speaker 1: it will take the personal consumption spending number, the person
Speaker 1: consumption spending number could be as much as nine of
Speaker 1: pre COVID levels by end of September, and that just
Speaker 1: tells you that how much progress we have made so far,
Speaker 1: So the v SHAP recovery path looks very much secure.
Speaker 1: Well okay, but this is all predicated on this idea
Speaker 1: that the balance sheet of homes have been bolstered by
Speaker 1: the stimulus that we'd already gotten from Washington, d C.
Speaker 1: If we don't get that re upt how many more
Speaker 1: months can consumers continue to sustain the recovery. Well, that's
Speaker 1: a very good question. So what we have been highlighting
Speaker 1: is that the underlying strength of the consumer balance sheet
Speaker 1: as well as income standing, has been quite good. So,
Speaker 1: for example, personal income as of August, and this is
Speaker 1: not for September, but as of August, personal income for
Speaker 1: household is already about my big COVID levels by two
Speaker 1: And the excess savings stock that the consumers have built
Speaker 1: in the last five months because of the stimulus and
Speaker 1: the fact they couldn't spend in the initial months is
Speaker 1: one point one trillion dollars. So the consumers have enough
Speaker 1: room to continue they're spending into this winter months. Chilling.
Speaker 1: You've been very bold and quite published on the economy,
Speaker 1: and you've been an outlier and Morgan Stanley have led
Speaker 1: that call over the last several months, coming out of
Speaker 1: that huge contraction earlier this year. Every economic house though,
Speaker 1: looks at their called their base case and acknowledge is
Speaker 1: a key vulnerability in their forecast. What is it for you,
Speaker 1: Chettam right now? Well, I think the key vulnerability is
Speaker 1: essentially the new cases. If they force aggressive shutdown, that
Speaker 1: will be the rest to our podcast. I think the
Speaker 1: stimulus is less of a risk because of the math
Speaker 1: that I mentioned to you on the household strength, but
Speaker 1: it's really this rise in new cases. If they really
Speaker 1: forced aggressive shutdown, that would be the near term risk.
Speaker 1: But again that's going to be a short term risk
Speaker 1: because as we head into a spring, we should again
Speaker 1: get an environment where virus itself begins to dissiplinate it.
Speaker 1: What do you think about the question that what is
Speaker 1: playing out in Europe right now is in America's future well,
Speaker 1: in terms of the virus cases, Yeah, Look, I think
Speaker 1: europe situation is very similar to what you saw in
Speaker 1: the US in June July. You are seeing ukses rising,
Speaker 1: hospitalizations are not rising in the same strength, and what
Speaker 1: you're seeing policymakers is taking a more pragmatic approach of
Speaker 1: not shutting down the economy across the board. I mean,
Speaker 1: if you just look at the actual facts of how
Speaker 1: much restrictions they have imposed, they're not really shut down
Speaker 1: restaurants all through. They've just decided to shut down restaurants
Speaker 1: late in the evening. So that just tells you that
Speaker 1: that point that I was making to you earlier, that
Speaker 1: the equation between virus and the economy is changing. So
Speaker 1: you think the recovery can continue even as cases built,
Speaker 1: because this would also imply chat and the consumers don't disengage,
Speaker 1: the companies don't lose confidence. Yeah, that's right, and I
Speaker 1: think at least in the US, we saw that that
Speaker 1: did not happen in June July, so we're more confident
Speaker 1: of the US. In Europe you could see some confidence impact.
Speaker 1: But look, as of now what we have isn't in
Speaker 1: the data, is not showing any big dent in the
Speaker 1: European economic numbers too. The most important number I look
Speaker 1: at is the restaurant activity um sorect to restaurant activity
Speaker 1: in Europe. For the data for the country that we have,
Speaker 1: Germany and UK had picked up a lot, but they're
Speaker 1: still back to like hundred percent levels, so they're not
Speaker 1: really showing a huge decline in retail activity in terms
Speaker 1: of restaurants spending, cheting. Great to catch up as always
Speaker 1: and what a cold so far is not over yet
Speaker 1: but it's looking good. Chat and I Morgan Stanley, chief
Speaker 1: Economist and Global Ahead of Economics, working alongside at the
Speaker 1: Center of course, the chief US Economist. Thanks for listening
Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews
Speaker 1: on Apple podcast, SoundCloud, or whichever podcast platform you prefer.
Speaker 1: I'm on Twitter at Tom Keane before the podcast. You
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio