1 00:00:00,320 --> 00:00:04,160 Speaker 1: Who you put your trust in matters. Investors have put 2 00:00:04,200 --> 00:00:07,640 Speaker 1: their trust in independent registered investment advisors to the tune 3 00:00:07,640 --> 00:00:12,240 Speaker 1: of four trillion dollars. Why learn more and find your 4 00:00:12,240 --> 00:00:28,160 Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:28,560 --> 00:00:32,239 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:32,320 --> 00:00:37,320 Speaker 1: insight from the best in economics, finance, investment, and international relations. 7 00:00:37,760 --> 00:00:42,320 Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 8 00:00:42,400 --> 00:00:49,680 Speaker 1: of course, on the Bloomberg. It is always a good 9 00:00:49,720 --> 00:00:52,720 Speaker 1: time to speak with David blanche Flower of Dartmouth College. 10 00:00:53,320 --> 00:00:56,040 Speaker 1: He is someone we can talk to our austerity on 11 00:00:56,120 --> 00:00:58,200 Speaker 1: the FED. We can talk to him about the mysteries 12 00:00:58,480 --> 00:01:00,880 Speaker 1: of economic growth. What we can really talk to him 13 00:01:00,920 --> 00:01:05,160 Speaker 1: about is the labor economics of Italy is classic. The 14 00:01:05,200 --> 00:01:08,640 Speaker 1: wage curve from a good twenty years ago was controversial 15 00:01:08,880 --> 00:01:12,120 Speaker 1: with us Ian Shepherdson as well. This morning from Pantheon 16 00:01:12,520 --> 00:01:16,679 Speaker 1: macro Economics, Professor Blanche Flower, I would suggest the wage 17 00:01:16,680 --> 00:01:19,880 Speaker 1: curve for Italy is destroyed. Here's the chart we showed 18 00:01:19,920 --> 00:01:26,680 Speaker 1: earlier under twenty five year old unemployment. His balloon from 19 00:01:26,720 --> 00:01:31,840 Speaker 1: to thirty seven percent. Danny Blanche Flowers labor economics doesn't 20 00:01:31,840 --> 00:01:35,679 Speaker 1: work in Italy, doesn't. No, not really in a sense 21 00:01:35,720 --> 00:01:39,479 Speaker 1: that to put it technically, there are long flatbits. What 22 00:01:39,520 --> 00:01:43,039 Speaker 1: we mean by that is when unemployments really high, labor 23 00:01:43,080 --> 00:01:45,760 Speaker 1: markets kind of stopped working. So think about when the 24 00:01:45,840 --> 00:01:49,720 Speaker 1: unemployment rates and it moves to a team doesn't change 25 00:01:49,720 --> 00:01:52,360 Speaker 1: things very much. So so this is a labor market 26 00:01:52,440 --> 00:01:57,240 Speaker 1: that hasn't been working, isn't working um and obviously that 27 00:01:57,320 --> 00:01:59,840 Speaker 1: has implications. I mean the big thing you see actually 28 00:02:00,480 --> 00:02:02,360 Speaker 1: if you look at in Britain as an awful lot 29 00:02:02,400 --> 00:02:05,640 Speaker 1: of Italian academics, they come out of the Italian labor 30 00:02:05,680 --> 00:02:09,200 Speaker 1: market moved to the UK. Young Italians do the same. 31 00:02:09,600 --> 00:02:13,480 Speaker 1: But this is clearly a labor market in crisis. Well, 32 00:02:13,480 --> 00:02:17,200 Speaker 1: it's a labor market in crisis. What are the incentives 33 00:02:17,240 --> 00:02:21,440 Speaker 1: to the people that the Italian government must initiate. Not 34 00:02:21,720 --> 00:02:26,760 Speaker 1: macroeconomic mumbo jumbo, but how do you incentivize these people 35 00:02:26,880 --> 00:02:33,919 Speaker 1: under to go get a job? Well, obviously there's two 36 00:02:33,960 --> 00:02:36,240 Speaker 1: parts to it. You obviously want to make sure on 37 00:02:36,280 --> 00:02:40,000 Speaker 1: the supply side that they have the skills, but the 38 00:02:40,120 --> 00:02:43,280 Speaker 1: reality is on the demand side, you've actually got to 39 00:02:43,400 --> 00:02:46,799 Speaker 1: offer adequate numbers of jobs and you said, talked to 40 00:02:46,880 --> 00:02:51,080 Speaker 1: Blanche Flower about wages and growth and austerity, and blanch 41 00:02:51,120 --> 00:02:55,000 Speaker 1: Flower would obviously come back and say, fiscal policies overly 42 00:02:55,160 --> 00:02:58,840 Speaker 1: tight as it's been throughout the European Union, um, and 43 00:02:58,919 --> 00:03:01,960 Speaker 1: we have very little incentive on the part of Italian 44 00:03:02,040 --> 00:03:06,440 Speaker 1: employers to hire young Italians. And so that's the problem. 45 00:03:06,480 --> 00:03:09,839 Speaker 1: Firms are not moving to Italy. But that's exactly where 46 00:03:09,880 --> 00:03:12,000 Speaker 1: I wanted to go. Tom bring up your chart right, 47 00:03:12,040 --> 00:03:14,799 Speaker 1: when you look at youth unemployment in Italy, it's huge. 48 00:03:14,840 --> 00:03:18,000 Speaker 1: When you look at Spain, look after that forty two percent. 49 00:03:18,080 --> 00:03:21,480 Speaker 1: Let's just think about this. Forty people between twenty five 50 00:03:21,520 --> 00:03:25,320 Speaker 1: and thirty five are unemployed in Spain. Danny, My question 51 00:03:25,360 --> 00:03:28,160 Speaker 1: to you is, how do you do Do you do 52 00:03:28,320 --> 00:03:33,080 Speaker 1: reforms that actually make employers want to hire but also 53 00:03:33,200 --> 00:03:35,240 Speaker 1: fire a lot of the people in it They are 54 00:03:35,240 --> 00:03:37,320 Speaker 1: holding back from hiring because then you're stuck with someone 55 00:03:37,360 --> 00:03:40,920 Speaker 1: for twenty years. Right, So the obvious thing, you've got 56 00:03:40,920 --> 00:03:45,160 Speaker 1: to raise the level of aggregate demand. Give firms incentives 57 00:03:45,200 --> 00:03:47,720 Speaker 1: to hire young people. You can do it through the 58 00:03:47,760 --> 00:03:51,360 Speaker 1: tax code. You give firms incentives. You say, if you 59 00:03:51,440 --> 00:03:54,640 Speaker 1: hire a young person, will give you this this tax credit. 60 00:03:54,760 --> 00:03:58,280 Speaker 1: We're not seeing any credible government in Italy focused on 61 00:03:58,320 --> 00:04:01,320 Speaker 1: those kinds of issues. That one thing you would actually say, 62 00:04:01,320 --> 00:04:05,440 Speaker 1: the surprise is actually these young people have been pretty compliant. 63 00:04:05,880 --> 00:04:07,880 Speaker 1: You would have thought they'd have been on the streets. 64 00:04:08,080 --> 00:04:13,200 Speaker 1: High levels of youth unemployment like that generally generates social disorder. 65 00:04:13,560 --> 00:04:16,479 Speaker 1: They haven't, and so that's obviously a big puzzle. But 66 00:04:16,760 --> 00:04:20,200 Speaker 1: you need to break this youth unemployment problem. What we 67 00:04:20,279 --> 00:04:24,320 Speaker 1: know that the famous line is a youth unemployment actually 68 00:04:24,360 --> 00:04:28,560 Speaker 1: generates a permanent scar rather than a temporary blemish on people. 69 00:04:28,720 --> 00:04:31,839 Speaker 1: So it's not just an individual problem. It's down the road. 70 00:04:31,880 --> 00:04:34,360 Speaker 1: The society is going to be heard by the fact 71 00:04:34,400 --> 00:04:36,680 Speaker 1: that these people haven't got into the label. Fritz, you 72 00:04:36,720 --> 00:04:38,640 Speaker 1: don't want to jump in. This is so critical. This 73 00:04:38,720 --> 00:04:42,440 Speaker 1: is the history recess that Olivier Blanchard and wren Somers 74 00:04:42,440 --> 00:04:45,919 Speaker 1: talks about. This is like, absolutely it is. But you 75 00:04:45,920 --> 00:04:49,159 Speaker 1: know what, talking to your point, let's start talking mumbo jumbo, Danny, 76 00:04:49,200 --> 00:04:52,960 Speaker 1: what needs to happen, because actually Materrancy was empowered. He's 77 00:04:53,040 --> 00:04:55,480 Speaker 1: forty one years old and he's in and the focus 78 00:04:55,520 --> 00:04:57,800 Speaker 1: was meant to get people back into jobs, and he's 79 00:04:57,839 --> 00:05:00,880 Speaker 1: been unable to do that. Well, I don't know about 80 00:05:00,960 --> 00:05:03,640 Speaker 1: mumbo jumbo. I mean there's a reality is that this 81 00:05:03,720 --> 00:05:06,880 Speaker 1: labor market has been in trouble for two or three decades. 82 00:05:07,320 --> 00:05:09,880 Speaker 1: The government doesn't seem to have any kind of ability 83 00:05:09,960 --> 00:05:12,839 Speaker 1: to do that. The fiscal framework is too tight. You 84 00:05:12,880 --> 00:05:15,520 Speaker 1: need to give firms incentives to hire, You need to 85 00:05:15,560 --> 00:05:18,919 Speaker 1: give incentives for mobility. You need to get the labor 86 00:05:18,960 --> 00:05:22,279 Speaker 1: market working, the capital market working, the housing market working, 87 00:05:22,560 --> 00:05:24,839 Speaker 1: and you need to loosen the levels of aggregate demaut 88 00:05:25,000 --> 00:05:28,120 Speaker 1: and give incentives for employers to hire the young. And 89 00:05:28,200 --> 00:05:30,880 Speaker 1: that's not what's been happening. Okay, we got Ian Shepherdson 90 00:05:30,960 --> 00:05:33,520 Speaker 1: and David Blanchelire where this this is what surveillance is 91 00:05:33,560 --> 00:05:36,479 Speaker 1: all about. Bring up the chart. This is from fokars Landau, 92 00:05:36,920 --> 00:05:40,279 Speaker 1: which is the idea here of they need a Lira. 93 00:05:40,800 --> 00:05:43,880 Speaker 1: And I'm not speaking for David fokars land off Deutsche Bank, 94 00:05:44,080 --> 00:05:47,680 Speaker 1: but Beppy Greenlow France been clearly says he wants an 95 00:05:47,680 --> 00:05:51,840 Speaker 1: independent Lira. Ian Shepherdson, what would happen two days or 96 00:05:51,920 --> 00:05:56,040 Speaker 1: two weeks after an independent Lira other than wealth destruction 97 00:05:56,120 --> 00:05:58,320 Speaker 1: for the elites of Italy that there would be gigantic 98 00:05:58,320 --> 00:06:02,279 Speaker 1: wealth destruction and extended period of total chaos at the breakup. 99 00:06:02,600 --> 00:06:05,160 Speaker 1: You couldn't have Italy leaving the Eurozone without the rest 100 00:06:05,200 --> 00:06:07,039 Speaker 1: of the Eurozone falling apart. So it's kind of the 101 00:06:07,320 --> 00:06:10,200 Speaker 1: end of the world event where things would lie six months, 102 00:06:10,200 --> 00:06:12,640 Speaker 1: one to three years down the line. That's a different question, 103 00:06:12,960 --> 00:06:14,560 Speaker 1: and it may well be that after a period of 104 00:06:14,560 --> 00:06:19,360 Speaker 1: extraordinary extended pain that actually a much weaker sovereign Italian 105 00:06:19,400 --> 00:06:21,839 Speaker 1: currency would would be would put it really into into 106 00:06:21,839 --> 00:06:23,880 Speaker 1: a better position. But I've got to say the transition 107 00:06:23,920 --> 00:06:26,600 Speaker 1: from where we are now to that would be horrendous 108 00:06:26,600 --> 00:06:28,320 Speaker 1: and it would be short term things would be much 109 00:06:28,320 --> 00:06:31,160 Speaker 1: worse without a doubt, right And Danny, so Tom keeps sudden, 110 00:06:31,240 --> 00:06:33,360 Speaker 1: you know, talking about the switch to Lira. I mean 111 00:06:33,360 --> 00:06:36,159 Speaker 1: this is extremely unlikely, right to Danny blanch when you 112 00:06:36,160 --> 00:06:37,680 Speaker 1: when you look at even Beppy Grille, I mean he 113 00:06:37,680 --> 00:06:40,680 Speaker 1: doesn't really have the best craft of economic so you 114 00:06:40,680 --> 00:06:43,240 Speaker 1: don't see how this would work. Do we just need 115 00:06:43,320 --> 00:06:46,520 Speaker 1: to have a prime minister with more power that has 116 00:06:46,520 --> 00:06:52,120 Speaker 1: a much more aggressive mandating reforms? Well, what what you want? 117 00:06:52,160 --> 00:06:56,320 Speaker 1: A credible market driven reforms where firms feel that there's 118 00:06:56,360 --> 00:07:00,520 Speaker 1: some certainty going forward that they can invest and higher. 119 00:07:00,720 --> 00:07:02,640 Speaker 1: I mean, what you and Tom have been talking about 120 00:07:03,040 --> 00:07:05,799 Speaker 1: is a country in chaos. I mean, we've seen similar 121 00:07:05,839 --> 00:07:09,400 Speaker 1: problems in the UK with Brexit. Has calm um. If 122 00:07:09,440 --> 00:07:11,679 Speaker 1: you can't form a government, you can't get a policy. 123 00:07:11,760 --> 00:07:14,400 Speaker 1: You you know, we don't know where this country is going. 124 00:07:14,760 --> 00:07:19,080 Speaker 1: Why would firms go in and hire young Italians? So 125 00:07:19,160 --> 00:07:22,160 Speaker 1: you've got to break that first. There's this great chicken 126 00:07:22,160 --> 00:07:24,440 Speaker 1: an egg, and if you're an employer, you'd say, well, 127 00:07:24,480 --> 00:07:27,480 Speaker 1: I think I'll go to Germany. Actually, but David, I 128 00:07:27,800 --> 00:07:30,560 Speaker 1: want to get this on the record. Professor Blanche or Is, 129 00:07:30,600 --> 00:07:33,640 Speaker 1: you're one of our true international authorities. What would be 130 00:07:33,680 --> 00:07:37,720 Speaker 1: the pain of an individual separate Lira? I mean, bring 131 00:07:37,800 --> 00:07:40,840 Speaker 1: up the chart here, Jose and the idea here. Ian 132 00:07:40,880 --> 00:07:45,520 Speaker 1: Shepherdson says there would be massive instability. Is lira depreciated? 133 00:07:45,600 --> 00:07:51,320 Speaker 1: Do you agree? Well, I mean he's completely right that 134 00:07:51,480 --> 00:07:54,280 Speaker 1: if suddenly you say we're going to go to the lira, 135 00:07:54,400 --> 00:07:57,000 Speaker 1: that would cause the collapse of the euro Zone. That 136 00:07:57,040 --> 00:08:01,680 Speaker 1: would have huge cataclysts, make effects for for quite some time. 137 00:08:02,080 --> 00:08:04,679 Speaker 1: But he's also right in that what you have here 138 00:08:05,160 --> 00:08:08,960 Speaker 1: is a currency that is overvalued for the Italian The 139 00:08:09,040 --> 00:08:11,440 Speaker 1: point of saying you would go to a lira would 140 00:08:11,440 --> 00:08:15,080 Speaker 1: be at least that would make the country competitive, and 141 00:08:15,160 --> 00:08:18,120 Speaker 1: so that is that is in some way attractive. So 142 00:08:18,240 --> 00:08:23,240 Speaker 1: it is completely right, um that a lower valued currency 143 00:08:24,000 --> 00:08:26,640 Speaker 1: could help. It's hard to see how you get to 144 00:08:26,720 --> 00:08:29,920 Speaker 1: the benefits of that lower currency without the cut this 145 00:08:30,800 --> 00:08:34,520 Speaker 1: terrible collapse that he's talked about. It's hard to know 146 00:08:34,559 --> 00:08:36,920 Speaker 1: where you go from here. But this does threaten us 147 00:08:37,120 --> 00:08:40,400 Speaker 1: the whole being of the euro Zone, right and tom 148 00:08:40,440 --> 00:08:42,320 Speaker 1: there are people out there saying that the market is 149 00:08:42,320 --> 00:08:44,720 Speaker 1: just a little bit too complacent ahead of that referendum 150 00:08:44,800 --> 00:08:47,360 Speaker 1: to do the leap from the referendum to actually getting 151 00:08:47,360 --> 00:08:50,920 Speaker 1: the lira bag is you know, it's humongous a lot. 152 00:08:51,120 --> 00:08:53,000 Speaker 1: You know, very few people are doing that leap at 153 00:08:53,000 --> 00:08:56,920 Speaker 1: the moment. Also, compared to Brexit, you can't constitution that 154 00:08:56,960 --> 00:08:58,920 Speaker 1: you can't put a referendum on whether to leave the 155 00:08:58,920 --> 00:09:14,120 Speaker 1: Eurozone or not to the at in So absolutely, December 156 00:09:14,240 --> 00:09:16,600 Speaker 1: four is a referendum in Italy, one that will be 157 00:09:16,600 --> 00:09:19,679 Speaker 1: closely watched in Italy, in Europe, indeed around the world. 158 00:09:19,720 --> 00:09:22,040 Speaker 1: Swatter Thing is a senior economist at T. S. Lombard, 159 00:09:22,160 --> 00:09:25,240 Speaker 1: a research and she joins us now by phone. We've 160 00:09:25,280 --> 00:09:28,560 Speaker 1: been told here that there's a continuum between the Brexit referendum, 161 00:09:28,720 --> 00:09:30,800 Speaker 1: the presidential election here in the US, and now this 162 00:09:30,880 --> 00:09:33,760 Speaker 1: referendum in Italy. And what you urge some caution there? 163 00:09:33,760 --> 00:09:38,480 Speaker 1: You say this is likely just to be a side show. Um. Yes, absolutely, Hi, 164 00:09:38,600 --> 00:09:41,960 Speaker 1: good morning there. So we think the you know, investors 165 00:09:41,960 --> 00:09:47,480 Speaker 1: are excessively focused on the referendum of thember of the vote. UM. 166 00:09:47,480 --> 00:09:49,240 Speaker 1: But I guess it's just it will just be a 167 00:09:49,280 --> 00:09:52,320 Speaker 1: side show in the largest game of things. Things will 168 00:09:52,360 --> 00:09:56,200 Speaker 1: not dramatically change after the referendum. In fact, they will 169 00:09:56,760 --> 00:10:01,640 Speaker 1: the trigger points for this sort of political days in in, in, in, 170 00:10:01,640 --> 00:10:06,400 Speaker 1: in Europe, last summer else. UM. Italy nonetheless remains a 171 00:10:06,480 --> 00:10:09,560 Speaker 1: key threat to a key medium term threat to UH 172 00:10:09,960 --> 00:10:13,439 Speaker 1: your area stability. But a no vote in the referendum, 173 00:10:13,960 --> 00:10:17,640 Speaker 1: while it will intensify near term volatility, it does not 174 00:10:17,840 --> 00:10:20,680 Speaker 1: spell doom. UM. And in the same way, yes vote 175 00:10:20,760 --> 00:10:25,679 Speaker 1: does not guarantee a recovery or reforms or recapitalization. UM. 176 00:10:25,720 --> 00:10:27,280 Speaker 1: I guess what I'm trying to say is that the 177 00:10:27,280 --> 00:10:32,000 Speaker 1: Italian problems are are very much supply side related, UH, 178 00:10:32,000 --> 00:10:36,439 Speaker 1: and they're deeply ingrained. UM. Vote on the referendum does 179 00:10:36,480 --> 00:10:39,440 Speaker 1: not change the story. Um. In fact, where the twelve 180 00:10:39,440 --> 00:10:43,120 Speaker 1: month horizon ECB policies and trumponomics, so to speak, a 181 00:10:43,160 --> 00:10:47,880 Speaker 1: strong dollar truth trumponomics I will actually provide a temporary 182 00:10:48,040 --> 00:10:52,720 Speaker 1: tailwind to two Italians. For me? Is it is Italy 183 00:10:52,760 --> 00:10:58,880 Speaker 1: an emerging market? Um? Well, if you look at the 184 00:10:59,160 --> 00:11:02,000 Speaker 1: performance of the the spreads every time there was a 185 00:11:02,000 --> 00:11:05,240 Speaker 1: political tremor, you might be tempted to believe it. I 186 00:11:05,360 --> 00:11:07,760 Speaker 1: believe so, UM, But I guess it depends how you 187 00:11:07,840 --> 00:11:12,120 Speaker 1: define emoting market. Um. The one of the ways I 188 00:11:12,520 --> 00:11:14,520 Speaker 1: try to define the MS is the the you know, 189 00:11:14,559 --> 00:11:19,080 Speaker 1: the correlation between stocks and heels that does not hold 190 00:11:19,160 --> 00:11:21,960 Speaker 1: so well in Italian In Italian case, well, you may 191 00:11:22,040 --> 00:11:25,160 Speaker 1: argue it's because of e c D policies. Um. But 192 00:11:25,679 --> 00:11:29,439 Speaker 1: it shows a lot of characteristics. But well, not not 193 00:11:29,640 --> 00:11:33,760 Speaker 1: yet animoting market. Not yet anyway, you know. I We've 194 00:11:33,800 --> 00:11:36,079 Speaker 1: talked an awful lot here about the banking sector, and 195 00:11:36,120 --> 00:11:38,120 Speaker 1: I wonder what you see is the path forward there 196 00:11:38,120 --> 00:11:41,439 Speaker 1: through in a sixty billion euros in non performing loans 197 00:11:41,440 --> 00:11:46,040 Speaker 1: there on the books, tremendously over banked country exclusive of 198 00:11:46,080 --> 00:11:50,000 Speaker 1: this referendum, how does that begin to get fixed? Right? 199 00:11:50,240 --> 00:11:55,160 Speaker 1: Um Um. Now, the Italian banking problem, UH, it's it's 200 00:11:55,240 --> 00:11:58,240 Speaker 1: it's it's a lot more difficult to rectify it because 201 00:11:58,240 --> 00:12:02,559 Speaker 1: of three important critiquy reasons. The first is the the 202 00:12:02,880 --> 00:12:06,760 Speaker 1: dominant share of these bad loans or sorry, the dominant 203 00:12:06,760 --> 00:12:10,960 Speaker 1: share of bank debt is held by retail investors um 204 00:12:11,040 --> 00:12:14,080 Speaker 1: as compared to in in other in other countries, So 205 00:12:14,200 --> 00:12:18,600 Speaker 1: one third of senior debt is held by retail investors, 206 00:12:18,640 --> 00:12:22,840 Speaker 1: while half of the junior debt is held by uh 207 00:12:22,840 --> 00:12:25,720 Speaker 1: A retail investors. And it's junior debt that will be 208 00:12:26,040 --> 00:12:28,640 Speaker 1: used if the banks have if if banks have to 209 00:12:28,679 --> 00:12:32,679 Speaker 1: be recapitalized. The second important reason is that the the 210 00:12:32,840 --> 00:12:37,000 Speaker 1: government itself, policymakers themselves have been have played a role 211 00:12:37,080 --> 00:12:41,600 Speaker 1: in in sort of selling this these bad potentially bad 212 00:12:41,640 --> 00:12:44,720 Speaker 1: assets to to the household sector. And third, it's the 213 00:12:44,920 --> 00:12:48,439 Speaker 1: the timing of the the eu Blian rules which came 214 00:12:48,440 --> 00:12:52,440 Speaker 1: in affect earlier this year, which prohibit or make it 215 00:12:52,520 --> 00:12:56,760 Speaker 1: very punitive to to for state aid uh to recap 216 00:12:56,800 --> 00:12:58,840 Speaker 1: the banking sector. So it's the culmination of these three 217 00:12:58,880 --> 00:13:02,280 Speaker 1: problems that's really making matters worse. Um. There was a 218 00:13:02,280 --> 00:13:06,960 Speaker 1: way out the advance uptil Solvent. Well, if you exclude 219 00:13:07,080 --> 00:13:10,200 Speaker 1: monted Departe, that is, there was a way out. They 220 00:13:10,240 --> 00:13:14,360 Speaker 1: can they can use the precautionary clause. They can uh 221 00:13:14,800 --> 00:13:19,480 Speaker 1: compensate the retail investors for miss selling. Um. Well, but 222 00:13:19,480 --> 00:13:22,480 Speaker 1: but but you have to you need political will to 223 00:13:22,600 --> 00:13:26,280 Speaker 1: go through that. That's lacking in Italy's case, and there's 224 00:13:26,280 --> 00:13:29,280 Speaker 1: always a reason before their friends they did not want 225 00:13:29,360 --> 00:13:33,839 Speaker 1: to disappoint policymakers or a retail investors. After the referendum, 226 00:13:34,000 --> 00:13:38,439 Speaker 1: attention will shift to the elections. Sing with us with 227 00:13:38,760 --> 00:13:43,160 Speaker 1: the definitive report and Italy from her Lombard Street Research. 228 00:13:43,600 --> 00:13:46,800 Speaker 1: Your report Shadow which I need to recover the cover 229 00:13:46,880 --> 00:13:52,000 Speaker 1: all twenty eight pages, shows that incentives are critical to Italy. 230 00:13:52,559 --> 00:13:54,720 Speaker 1: When you and Charles Duma sit around a cup of 231 00:13:54,760 --> 00:13:59,800 Speaker 1: coffee with Jonathan Fenby, what's the key incentive that big 232 00:14:00,040 --> 00:14:06,880 Speaker 1: ins to nudge Italy towards a modern economy? Um, the 233 00:14:07,000 --> 00:14:10,760 Speaker 1: key incenter would probably have to be, you know, um, 234 00:14:10,920 --> 00:14:15,080 Speaker 1: directing capital uh and and and labor, all the productive 235 00:14:15,080 --> 00:14:20,040 Speaker 1: resources towards the right area. We've seen as a massive 236 00:14:20,160 --> 00:14:22,920 Speaker 1: increase in this allocation in the manufacturing sector and it 237 00:14:23,000 --> 00:14:27,160 Speaker 1: has continued to increase, of course dramatically since the you're 238 00:14:27,320 --> 00:14:31,800 Speaker 1: since that joined the Euro and after the global financial crisis. UM. 239 00:14:31,840 --> 00:14:34,240 Speaker 1: I guess there are a lot of rigidities within the 240 00:14:34,280 --> 00:14:37,080 Speaker 1: economy itself, whether you look at the product market, whether 241 00:14:37,120 --> 00:14:39,960 Speaker 1: you look at the the label sector, labor segments, the 242 00:14:40,040 --> 00:14:43,440 Speaker 1: the capital segments. And I guess one of the key problems, 243 00:14:43,640 --> 00:14:47,800 Speaker 1: UH is is the there's a dominance of state of 244 00:14:48,160 --> 00:14:52,280 Speaker 1: small and medium enterprises. In Italy. Almost eighty five percent 245 00:14:52,840 --> 00:14:56,320 Speaker 1: of employment comes from the small and medium medium uh 246 00:14:56,920 --> 00:15:01,000 Speaker 1: small industries, and that sort of restricts the gains you 247 00:15:01,320 --> 00:15:04,720 Speaker 1: could enjoy from economy of scale. UH. You know, when 248 00:15:04,720 --> 00:15:07,840 Speaker 1: you speak to a various small businesses, they say they 249 00:15:07,880 --> 00:15:10,920 Speaker 1: did they preferred turban small because the the tax code 250 00:15:10,920 --> 00:15:14,200 Speaker 1: and it's so intense. UM. And then you you have 251 00:15:14,560 --> 00:15:17,280 Speaker 1: various restrictions in terms of how many farms we can 252 00:15:17,320 --> 00:15:20,320 Speaker 1: have within a certain area. And it also extends to 253 00:15:20,560 --> 00:15:24,080 Speaker 1: various other retail segments. Did the mark up on the 254 00:15:24,080 --> 00:15:27,440 Speaker 1: the on the retail prices is significantly higher in Italy 255 00:15:27,800 --> 00:15:31,640 Speaker 1: than in any any European economy. As you were saying earlier, 256 00:15:31,640 --> 00:15:34,400 Speaker 1: it's it's an overbanked country. And I guess The reflection 257 00:15:34,480 --> 00:15:37,680 Speaker 1: of all these weaknesses is the fact that the activity 258 00:15:37,760 --> 00:15:41,400 Speaker 1: growth has been stagnant for almost a decade. And how 259 00:15:42,440 --> 00:15:45,320 Speaker 1: sure you you in that very lucid report right about 260 00:15:45,520 --> 00:15:48,520 Speaker 1: the small window of opportunity Italy has here to to 261 00:15:48,640 --> 00:15:52,000 Speaker 1: write its economic and financial malaise. How small a window 262 00:15:52,000 --> 00:15:54,120 Speaker 1: were we talking about here? And I wonder if that 263 00:15:54,280 --> 00:15:58,880 Speaker 1: is going to happen under Matteo Rensey's leadership. The window 264 00:15:58,920 --> 00:16:02,480 Speaker 1: of opportunity is is getting smaller because uh, you know 265 00:16:02,520 --> 00:16:05,480 Speaker 1: as all because at least for the next twelve months 266 00:16:05,480 --> 00:16:09,800 Speaker 1: you have support from ECB, Dewy and UH and a 267 00:16:09,880 --> 00:16:13,760 Speaker 1: strong dollar thanks to h tromponomics so to speak. Um. 268 00:16:14,040 --> 00:16:16,960 Speaker 1: But you know, very gradually we will see uh, well 269 00:16:17,000 --> 00:16:21,040 Speaker 1: will see strengthening in the euro Uh. The ECB will 270 00:16:21,120 --> 00:16:24,520 Speaker 1: have to start tapering its asset purchases and that means 271 00:16:24,520 --> 00:16:27,240 Speaker 1: we will be even more exposed to a higher global 272 00:16:27,280 --> 00:16:31,240 Speaker 1: youth and there will be increase in political uncertainty across Europe. 273 00:16:31,560 --> 00:16:34,320 Speaker 1: We have elections in the Netherlands, um in in in 274 00:16:34,400 --> 00:16:37,480 Speaker 1: France and in Germany. So it's it's a combination of 275 00:16:37,680 --> 00:16:41,000 Speaker 1: all these factors. Not to forget it really might be 276 00:16:41,080 --> 00:16:45,440 Speaker 1: heading towards another towards its own general elections. So I 277 00:16:45,480 --> 00:16:48,360 Speaker 1: guess the visitor really is narrowing, especially if you look 278 00:16:48,360 --> 00:16:52,360 Speaker 1: at the banking sector. Um. Uh So at this point 279 00:16:52,400 --> 00:16:55,600 Speaker 1: in time, what is helping the sector survive is whatever 280 00:16:55,680 --> 00:16:59,400 Speaker 1: literally nominal GDP broad that they have and and and 281 00:16:59,560 --> 00:17:03,040 Speaker 1: a chief actor driving back to the weaker Euro. So 282 00:17:03,160 --> 00:17:06,480 Speaker 1: once these things take to roy it will it will 283 00:17:06,560 --> 00:17:11,359 Speaker 1: be quite a nasty scenario. Okay, you just hit on 284 00:17:11,480 --> 00:17:16,879 Speaker 1: the discussion point. They've got to get away from the 285 00:17:17,000 --> 00:17:21,280 Speaker 1: over value euro. Do they do that within the euro 286 00:17:21,440 --> 00:17:26,560 Speaker 1: model or do you just presume some form of depreciation 287 00:17:27,200 --> 00:17:35,760 Speaker 1: towards a renewed Italian lira. Um. I guess, but I 288 00:17:35,960 --> 00:17:39,120 Speaker 1: think stands it will have to you know, the the 289 00:17:39,280 --> 00:17:42,440 Speaker 1: need to suppose at this at least at this point 290 00:17:42,480 --> 00:17:45,240 Speaker 1: in time, it's coming from the c D two. But 291 00:17:45,440 --> 00:17:48,159 Speaker 1: gradually want the your stars to strength, and thanks to 292 00:17:48,320 --> 00:17:52,480 Speaker 1: strength in the German economy for example, uh, improving corny 293 00:17:52,520 --> 00:17:56,119 Speaker 1: concerts in your in your area, I guess the the 294 00:17:56,160 --> 00:17:59,200 Speaker 1: burden of balancing will will fall back on on Themandi 295 00:17:59,280 --> 00:18:02,560 Speaker 1: station Uh. And that's really quite a punitive way to 296 00:18:02,600 --> 00:18:08,320 Speaker 1: address the problem. Uh. Notwithstanding the very very high non 297 00:18:08,359 --> 00:18:11,639 Speaker 1: performing loan version of the banking sector. I would struck 298 00:18:11,840 --> 00:18:15,200 Speaker 1: in your report. Uh, the degree to which so much 299 00:18:15,280 --> 00:18:18,359 Speaker 1: of of the Italian economy's troubles right now you attribute 300 00:18:18,359 --> 00:18:20,600 Speaker 1: to what happened with the w t O and China 301 00:18:20,640 --> 00:18:22,680 Speaker 1: signed onto the w t O. Why would that happen? 302 00:18:22,760 --> 00:18:27,800 Speaker 1: Was Italy hit so profoundly hard? Um? Yeah, So we 303 00:18:27,880 --> 00:18:31,040 Speaker 1: call it three strikes and you're out. So the first 304 00:18:31,040 --> 00:18:35,720 Speaker 1: strike was the information and communications technology, which Italian of 305 00:18:35,800 --> 00:18:38,680 Speaker 1: businesses quite well, we're quite a lagged in terms of 306 00:18:38,720 --> 00:18:42,560 Speaker 1: adopting those technologies. And again the reasons are, you know, 307 00:18:42,600 --> 00:18:48,840 Speaker 1: this this sort of relationship based U based businesses where 308 00:18:48,840 --> 00:18:51,960 Speaker 1: where people are not really and managerial incentives are not 309 00:18:52,080 --> 00:18:56,679 Speaker 1: really inclined towards profit for example. The second time was 310 00:18:56,680 --> 00:19:00,480 Speaker 1: was Italy joining the euro and that meant that ment 311 00:19:00,600 --> 00:19:04,200 Speaker 1: the the policy tool that was that it's Italian authority 312 00:19:04,320 --> 00:19:07,160 Speaker 1: is so frequently used that the devaluation was no longer 313 00:19:07,240 --> 00:19:10,919 Speaker 1: an option to them. And the third strike was was 314 00:19:11,160 --> 00:19:14,879 Speaker 1: Italy joining sorry, was China joining the w and and 315 00:19:14,920 --> 00:19:18,280 Speaker 1: the reason why this this hurt Italian economy a lot 316 00:19:18,320 --> 00:19:21,479 Speaker 1: more than it did the other European economies is that 317 00:19:21,600 --> 00:19:25,800 Speaker 1: Italian exports are very similar to Chinese exports. They're concentrated 318 00:19:25,840 --> 00:19:29,480 Speaker 1: at the lower value added seconds um and and the 319 00:19:29,640 --> 00:19:34,840 Speaker 1: d the rigidity on the product product labor, and there 320 00:19:35,000 --> 00:19:39,720 Speaker 1: is other institutional weaknesses. Thanked that really was more exposed 321 00:19:39,840 --> 00:19:44,000 Speaker 1: to these three forces external forces than many other economy 322 00:19:44,119 --> 00:19:48,480 Speaker 1: within the area. We continue to see that. Try to 323 00:19:48,520 --> 00:19:51,880 Speaker 1: thank you so much, saying with Lombard Street Research this 324 00:19:51,960 --> 00:19:59,720 Speaker 1: morning and Italy, who you put your trust in matters. 325 00:20:00,400 --> 00:20:04,240 Speaker 1: Investors have put their trust in independent registered investment advisors 326 00:20:04,280 --> 00:20:08,640 Speaker 1: to the tune of four trillion dollars. Why they see 327 00:20:08,640 --> 00:20:12,359 Speaker 1: their role is to serve, not sell. That's why Charles 328 00:20:12,400 --> 00:20:15,120 Speaker 1: Schwab is committed to the success of over seven thousand 329 00:20:15,200 --> 00:20:20,320 Speaker 1: independent financial advisors who passionately dedicate themselves to helping people 330 00:20:20,320 --> 00:20:24,520 Speaker 1: achieve their financial goals. Learn more and find your independent 331 00:20:24,560 --> 00:20:35,240 Speaker 1: advisor dot com we go now at. Stephen Shork, editor 332 00:20:35,240 --> 00:20:38,680 Speaker 1: of the eponymous Short Report out of Philadelphia, spoke with 333 00:20:38,760 --> 00:20:41,640 Speaker 1: him yesterday. He expressed some skepticism that OPEC delegates would 334 00:20:41,640 --> 00:20:43,919 Speaker 1: be able to come to an agreement on a production freeze. Indeed, 335 00:20:44,359 --> 00:20:47,080 Speaker 1: Bloomberg News reporting this morning according to two delegates they 336 00:20:47,119 --> 00:20:50,400 Speaker 1: have agreed to a freeze here on this the first 337 00:20:50,480 --> 00:20:52,840 Speaker 1: day of that OPEC meeting in Vienna at Stephen Shork. 338 00:20:53,400 --> 00:20:55,280 Speaker 1: Great to have you with us here is that it 339 00:20:55,440 --> 00:20:58,960 Speaker 1: all said and done. We haven't a great It's really 340 00:20:59,000 --> 00:21:02,040 Speaker 1: this simple, right. So I was on bloomberg yest today 341 00:21:02,560 --> 00:21:08,719 Speaker 1: expressed my skepticism that we would get it. I'm on 342 00:21:08,760 --> 00:21:13,399 Speaker 1: today and the premise of that my skepticism still holds 343 00:21:13,560 --> 00:21:17,359 Speaker 1: that I based it on the fact that without a 344 00:21:17,400 --> 00:21:21,680 Speaker 1: material concession by Iran, I couldn't see how Saudi Arabia 345 00:21:21,680 --> 00:21:23,680 Speaker 1: could ever sign off on this deal, and hence why 346 00:21:23,720 --> 00:21:25,920 Speaker 1: they've been at loggerheads now for the past two years. 347 00:21:26,400 --> 00:21:29,920 Speaker 1: So with the preliminary data coming out, what I'm reading 348 00:21:29,960 --> 00:21:32,880 Speaker 1: off of my Bloomberg here is that OPEC has agreed 349 00:21:33,320 --> 00:21:35,920 Speaker 1: and let's let's let's mind you this isn't official. It 350 00:21:36,000 --> 00:21:39,639 Speaker 1: is coming from an anonymous source, but OPEC has agreed 351 00:21:39,680 --> 00:21:43,400 Speaker 1: to cut production by one point two million barrels a day. Now. 352 00:21:43,440 --> 00:21:47,720 Speaker 1: Interestingly enough, Iran is going to be able to up 353 00:21:47,760 --> 00:21:50,280 Speaker 1: its production to three point nine million barrels a day, 354 00:21:50,400 --> 00:21:53,320 Speaker 1: So at three point seven currently with Iran, that means 355 00:21:53,320 --> 00:21:55,800 Speaker 1: i Ran adds two hundred thousand barrels to the market, 356 00:21:55,960 --> 00:21:58,840 Speaker 1: which means now other OPEC members have to cut one 357 00:21:58,880 --> 00:22:02,480 Speaker 1: point four million arles a day. So of course that's 358 00:22:02,480 --> 00:22:06,760 Speaker 1: going to be meaning that Saudi Arabia and Iraq are 359 00:22:06,800 --> 00:22:08,880 Speaker 1: going to have to bury the brunt of this. And 360 00:22:08,880 --> 00:22:13,119 Speaker 1: and once again, guys, I'm extremely skeptical of this report. 361 00:22:13,160 --> 00:22:15,239 Speaker 1: I don't see how Saudi Arabia signs off on it. 362 00:22:15,840 --> 00:22:18,160 Speaker 1: But in the here and the now, that's the headline 363 00:22:18,280 --> 00:22:21,000 Speaker 1: and the markets rage respect. I don't know if you've 364 00:22:21,000 --> 00:22:23,240 Speaker 1: seen it. I put it on Twitter, Stephen Short because 365 00:22:23,320 --> 00:22:27,320 Speaker 1: my good morning. There is a spectacular Bloomberg gad Fly 366 00:22:27,640 --> 00:22:32,280 Speaker 1: article for Liam Dunning and right co writing and it 367 00:22:32,440 --> 00:22:38,679 Speaker 1: focuses on demand. Gus what you see for oil demand? 368 00:22:38,840 --> 00:22:42,760 Speaker 1: Gad Fly says it's gonna vapor away. China is at 369 00:22:42,800 --> 00:22:46,560 Speaker 1: the margin. But what is oil demand in the United States? 370 00:22:46,560 --> 00:22:49,440 Speaker 1: Steve that you own, I mean, what what does demand 371 00:22:49,560 --> 00:22:54,359 Speaker 1: like in Kansas or Florida or Washington State? Well, in 372 00:22:54,400 --> 00:22:56,520 Speaker 1: the here, in the miror And this is the premise 373 00:22:56,560 --> 00:22:59,040 Speaker 1: why I think OPEC should and would want to keep 374 00:22:59,119 --> 00:23:02,720 Speaker 1: oil prices as low as possible because demand here in 375 00:23:02,760 --> 00:23:04,959 Speaker 1: the United States, we just came out of last summer 376 00:23:05,359 --> 00:23:08,040 Speaker 1: with the greatest demand for gasoline that we've ever seen. 377 00:23:08,200 --> 00:23:11,199 Speaker 1: And why was that. It's because of a losticity of demand. 378 00:23:11,320 --> 00:23:13,679 Speaker 1: Two dollars a gallon, you get a lot more people 379 00:23:13,760 --> 00:23:17,600 Speaker 1: on the road, driving bigger, larger, longer distances. Uh. And 380 00:23:17,640 --> 00:23:20,880 Speaker 1: so demand was very strong. And this is what OPEC 381 00:23:21,440 --> 00:23:25,040 Speaker 1: essentially needs to have to happen, because what I also 382 00:23:25,080 --> 00:23:28,159 Speaker 1: spoke about on Bloomer yesterday is the Tesla effect. You 383 00:23:28,160 --> 00:23:30,879 Speaker 1: remember ten years ago we're all talking about. Well, I 384 00:23:30,920 --> 00:23:32,840 Speaker 1: wasn't because I always thought it was a fallacy. But 385 00:23:32,960 --> 00:23:37,080 Speaker 1: peak oil supply today, because of alternative fuels, we are 386 00:23:37,119 --> 00:23:41,480 Speaker 1: talking about peak oil demand. And so each dollar you 387 00:23:41,600 --> 00:23:45,320 Speaker 1: raised the barrel of oil is a marginal decrease in 388 00:23:45,600 --> 00:23:49,600 Speaker 1: the entry barrier for alternative fuels. So even driving into 389 00:23:49,640 --> 00:23:52,359 Speaker 1: the studio yesterday into Philadelphia on the school goal, I 390 00:23:52,400 --> 00:23:55,840 Speaker 1: saw four teslas. This is Philadelphia, for crying out live 391 00:23:56,200 --> 00:24:00,040 Speaker 1: driving Tesla's in Philadelphia. That means this is really a 392 00:24:00,119 --> 00:24:02,920 Speaker 1: harding to take off. And so we're looking into we're 393 00:24:02,960 --> 00:24:06,960 Speaker 1: talking about the long term relevancy of OPEC and if 394 00:24:06,960 --> 00:24:10,000 Speaker 1: they succeed in driving oil prices to a level where 395 00:24:10,119 --> 00:24:13,399 Speaker 1: we start to see gasoline prices well above three dollars. Well, 396 00:24:13,600 --> 00:24:17,040 Speaker 1: that is only going to eat into demand longer term out. 397 00:24:17,080 --> 00:24:18,720 Speaker 1: So this is a long this is a long term 398 00:24:18,760 --> 00:24:22,480 Speaker 1: existential threat to back in all oil producers in here 399 00:24:22,480 --> 00:24:26,040 Speaker 1: and they now, uh right now because me in the future. 400 00:24:26,480 --> 00:24:28,920 Speaker 1: Right now, what we have is this is great news 401 00:24:28,960 --> 00:24:33,040 Speaker 1: help for US producer. Yes, Steven, We've been talking a 402 00:24:33,040 --> 00:24:35,320 Speaker 1: lot about the role that Moscow is playing here, the 403 00:24:35,760 --> 00:24:37,680 Speaker 1: role of Russia here, and I wonder what that says 404 00:24:37,680 --> 00:24:41,560 Speaker 1: about the the the medium term future, the future of 405 00:24:41,600 --> 00:24:43,760 Speaker 1: OPEC that so much emphasis was placed on Russia. An 406 00:24:44,320 --> 00:24:47,600 Speaker 1: opaque member. Yeah, and I trust, I mean, I trust 407 00:24:47,680 --> 00:24:49,840 Speaker 1: the crimblin, don't you I'm putin seems like a pretty 408 00:24:49,880 --> 00:24:53,240 Speaker 1: stand up guy. And and why why wouldn't we believe 409 00:24:53,280 --> 00:24:56,560 Speaker 1: anything that comes out of Russia nowadays? Uh So, that said, 410 00:24:56,800 --> 00:24:58,800 Speaker 1: if we look about if we go back to April, 411 00:25:00,080 --> 00:25:03,440 Speaker 1: this is when US production hit a modern day record. 412 00:25:03,760 --> 00:25:08,200 Speaker 1: Since April two, US producers have taken off the market 413 00:25:08,200 --> 00:25:11,680 Speaker 1: one point one million bars a day. At that same time, 414 00:25:11,960 --> 00:25:15,160 Speaker 1: OPEC has added two point six million barrels a day. 415 00:25:15,400 --> 00:25:20,040 Speaker 1: Russia has added in additional six barrels a day, So essentially, 416 00:25:20,040 --> 00:25:23,280 Speaker 1: for everyone, barrel the U S producer took off Opec 417 00:25:23,400 --> 00:25:26,879 Speaker 1: in Russia added back three barrels. So now we're talking 418 00:25:26,920 --> 00:25:30,240 Speaker 1: about trying to take some of that added oil back 419 00:25:30,240 --> 00:25:33,640 Speaker 1: to the market. Um, to take that oil back off 420 00:25:33,640 --> 00:25:36,840 Speaker 1: the market from Opec in Russia. Him again, highly skeptical. 421 00:25:36,880 --> 00:25:39,240 Speaker 1: I don't believe a thing that comes out of if 422 00:25:39,280 --> 00:25:42,720 Speaker 1: put put it this way. Putin's lips are moving. He's lying, 423 00:25:43,200 --> 00:25:46,120 Speaker 1: So I don't know why. But again, markets up three 424 00:25:46,119 --> 00:25:48,600 Speaker 1: dollars and fifty cents. But this is great news to 425 00:25:48,680 --> 00:25:51,960 Speaker 1: the Canadian producer and the US because they're gonna start 426 00:25:51,960 --> 00:25:54,080 Speaker 1: to add out a lot barrel and one minute left, 427 00:25:54,160 --> 00:25:57,280 Speaker 1: one minute left. What is the dynamics of price on 428 00:25:57,320 --> 00:26:00,640 Speaker 1: the downside if we get a Steve short break, Yes, 429 00:26:00,720 --> 00:26:04,320 Speaker 1: forty a big resistance or could we revisit twenty nine 430 00:26:04,320 --> 00:26:07,000 Speaker 1: dollars a barrel? Oh? I think we can. Yeah, if 431 00:26:07,080 --> 00:26:10,040 Speaker 1: this all turns out to be smoking mirrors, and if 432 00:26:10,080 --> 00:26:12,320 Speaker 1: they come out with their official statement and they and 433 00:26:12,400 --> 00:26:16,800 Speaker 1: they punt and um, then this obviously this is going 434 00:26:16,840 --> 00:26:20,880 Speaker 1: to um evaporate. So yes we can. Forty is nothing 435 00:26:20,880 --> 00:26:23,600 Speaker 1: but a psychological moment. There's nothing magical about that. But 436 00:26:23,720 --> 00:26:26,800 Speaker 1: certainly with stagnant demand growth. And that's not me, that's 437 00:26:26,840 --> 00:26:30,000 Speaker 1: the I e. A. Saying stagnant demand growth through next year. 438 00:26:30,240 --> 00:26:32,920 Speaker 1: We could certainly see sub thirty dollars oil if if 439 00:26:32,960 --> 00:26:35,520 Speaker 1: this deal turns out to be a far but in 440 00:26:35,600 --> 00:26:38,200 Speaker 1: here and the now, stay away from it. We're headed 441 00:26:38,200 --> 00:26:40,520 Speaker 1: back to over fifty dollars if this, if they do 442 00:26:40,560 --> 00:26:43,000 Speaker 1: make good on the deal. Stephen Shark, thank you so much. 443 00:26:43,000 --> 00:26:46,919 Speaker 1: A Shark report on oil and gas and valves and 444 00:26:47,680 --> 00:26:51,280 Speaker 1: pipelines and all things energy. I mean, you know, Francy 445 00:26:51,400 --> 00:26:55,120 Speaker 1: mentioned it brilliantly today. David Girl, We in America don't 446 00:26:55,200 --> 00:26:58,680 Speaker 1: understand the frenzy of an opaqu com meeting. You're saying, 447 00:26:58,800 --> 00:27:00,920 Speaker 1: so you wish you could cover one with you. I've 448 00:27:00,920 --> 00:27:04,119 Speaker 1: never been, but Francine says, it's bizarre. It's all these 449 00:27:04,200 --> 00:27:08,760 Speaker 1: informal little chit chats with reporters and a handline will 450 00:27:08,800 --> 00:27:16,639 Speaker 1: come out stopping doors stopping. Yeah, they're stopping exactly, and 451 00:27:16,680 --> 00:27:19,640 Speaker 1: there's like a single headline comes out in granted, Bloomberg 452 00:27:19,680 --> 00:27:22,560 Speaker 1: is the fastest and best, and headlines are heard and 453 00:27:22,600 --> 00:27:25,080 Speaker 1: the oil price moves and then here's a new one. 454 00:27:25,160 --> 00:27:28,479 Speaker 1: Just kneel hum out on Twitter and it's a Bloomberg headline. 455 00:27:28,520 --> 00:27:32,120 Speaker 1: OPEC ministers still debating details of oil. I'll put cut 456 00:27:32,160 --> 00:27:35,600 Speaker 1: proposal for some countries. I have no idea what I'm reading, 457 00:27:35,640 --> 00:27:38,200 Speaker 1: but there is there are more informal breakfast to be had. 458 00:27:39,119 --> 00:27:43,320 Speaker 1: Any way to run a cartel exactly well said, I mean, 459 00:27:43,760 --> 00:27:46,640 Speaker 1: how do you run the microeconomics of a cartel? By 460 00:27:46,720 --> 00:27:49,720 Speaker 1: scrum Francine is a pro at this Yes, thanks to 461 00:27:49,800 --> 00:27:52,119 Speaker 1: Javier bloss In our oil team, they are there. Stewart 462 00:27:52,160 --> 00:27:55,800 Speaker 1: Wallace leading our we do. Stewart Wallace leads a coverage 463 00:27:55,800 --> 00:27:59,679 Speaker 1: in London. Stewart Wallace was with John Rockefeller at the 464 00:27:59,760 --> 00:28:06,000 Speaker 1: first oil oil Derek east of Cleveland. I mean he 465 00:28:06,080 --> 00:28:25,080 Speaker 1: goes Stuart Wallace goes back that far. Our next because 466 00:28:25,160 --> 00:28:26,720 Speaker 1: David Girl is going to bring in our next guess. 467 00:28:26,720 --> 00:28:29,959 Speaker 1: Anthony Scaramuchi. You may not know the name. Mr Trump 468 00:28:30,040 --> 00:28:32,760 Speaker 1: knows his name because he was out early and often 469 00:28:33,520 --> 00:28:38,200 Speaker 1: for Donald Trump when any and all doubted. Mr Scaramuchi 470 00:28:38,320 --> 00:28:41,959 Speaker 1: is an interesting guy, toughs economics, Harvard Law School. And 471 00:28:42,040 --> 00:28:47,240 Speaker 1: what is great, uh David about Mr Scaramucci is there 472 00:28:47,360 --> 00:28:51,600 Speaker 1: is an there's like a Mike Piazza energy there like 473 00:28:51,920 --> 00:28:55,760 Speaker 1: day one let's like, let's go. And what's great about 474 00:28:55,800 --> 00:28:59,480 Speaker 1: this is he bought Mike Piazza's jersey years ago, which 475 00:28:59,480 --> 00:29:03,680 Speaker 1: one is wonderful. Game after September eleventh, David, why don't 476 00:29:03,680 --> 00:29:05,920 Speaker 1: you help us? Uh? Maybe is can he make a 477 00:29:06,760 --> 00:29:10,360 Speaker 1: Can he make an announcement right now? Can he transit? If? 478 00:29:10,400 --> 00:29:14,320 Speaker 1: Following Anthony scar A, co founder of Skybridge Capital, executive 479 00:29:14,320 --> 00:29:16,000 Speaker 1: comittee for the Trump transition team. And that's where I 480 00:29:16,000 --> 00:29:18,800 Speaker 1: want to start. Anthony, you had a front row seat 481 00:29:18,840 --> 00:29:21,280 Speaker 1: for the parade as it passed through Bedminster and along 482 00:29:21,320 --> 00:29:23,800 Speaker 1: Fifth Avenue. Donald Trump looking at many people for this 483 00:29:23,880 --> 00:29:26,800 Speaker 1: job of Treasury Secretary? Why did he settle on Stephen Nuchin? 484 00:29:27,840 --> 00:29:29,920 Speaker 1: I first want to say, if I had Tom's height, 485 00:29:30,240 --> 00:29:33,040 Speaker 1: anything could have been possible for me. Gave it. But 486 00:29:33,240 --> 00:29:35,760 Speaker 1: on on on the topic of the of the transition 487 00:29:35,800 --> 00:29:39,480 Speaker 1: and Treasury, Stephen Manuchin is a perfect pick for many 488 00:29:39,560 --> 00:29:41,640 Speaker 1: reasons that I'm gonna give you the top three. Number 489 00:29:41,640 --> 00:29:45,520 Speaker 1: one twenty plus year relationship with Donald Trump and with 490 00:29:45,600 --> 00:29:49,360 Speaker 1: Wilbur Ross, the new Income and Commerce Secretary. Number two. 491 00:29:49,560 --> 00:29:52,640 Speaker 1: He is a phenomenal guy and a number of different businesses. 492 00:29:52,680 --> 00:29:56,160 Speaker 1: He's worked in Hollywood, He's worked on Wall Street. And 493 00:29:56,200 --> 00:29:59,880 Speaker 1: he also built from scratch the finance operation which power 494 00:30:00,160 --> 00:30:04,160 Speaker 1: us through to the presidency. And he was critical in 495 00:30:04,200 --> 00:30:07,920 Speaker 1: the policy piece of our website UH and building the 496 00:30:08,000 --> 00:30:10,440 Speaker 1: tax plan, in all the white papers around the economic 497 00:30:10,640 --> 00:30:13,560 Speaker 1: and trade policy for the Trump campaign. So I know 498 00:30:13,640 --> 00:30:16,640 Speaker 1: this is UH something that it will carry through with 499 00:30:16,720 --> 00:30:19,800 Speaker 1: him into the administration. And I've had the opportunities know 500 00:30:19,960 --> 00:30:22,920 Speaker 1: Steve now for a quarter century, Anthony. A lot of 501 00:30:22,920 --> 00:30:26,000 Speaker 1: people here saying we know the background, we know about Goldman, Sachs, 502 00:30:26,080 --> 00:30:29,320 Speaker 1: we know about Hollywood. They want clarity about how Stephen 503 00:30:29,320 --> 00:30:31,640 Speaker 1: Manutin is going to run the Treasury Department. Give us 504 00:30:31,640 --> 00:30:36,080 Speaker 1: some sense of that. Well, listen, he's a very organized guy. 505 00:30:36,120 --> 00:30:39,400 Speaker 1: He's super meticulous. My my, My guess is he's going 506 00:30:39,440 --> 00:30:42,320 Speaker 1: to start with the first order of shop is the 507 00:30:42,400 --> 00:30:46,080 Speaker 1: tax policy and the implementation of the tax policy. UH. 508 00:30:46,160 --> 00:30:49,440 Speaker 1: He's already going through the U S. Trade representative list 509 00:30:49,520 --> 00:30:53,360 Speaker 1: with our transition team this morning, Deputy and Under Secretaries 510 00:30:53,400 --> 00:30:56,840 Speaker 1: of Treasury. But the first order of action is going 511 00:30:56,920 --> 00:30:59,920 Speaker 1: to be on taxes and getting the Trump tax plan 512 00:31:00,000 --> 00:31:04,080 Speaker 1: into the Congress immediately within the first for days. The 513 00:31:04,120 --> 00:31:07,360 Speaker 1: second big piece of this is working in coordination with 514 00:31:07,520 --> 00:31:11,520 Speaker 1: the President, Secretary of Commerce, and the US trade representatives 515 00:31:11,960 --> 00:31:16,000 Speaker 1: to focus on fair deals and right siding these trade deals. 516 00:31:16,000 --> 00:31:18,600 Speaker 1: As you guys both know, our economic history in the 517 00:31:18,640 --> 00:31:23,440 Speaker 1: United States is that we've uneven these trade deals to 518 00:31:23,640 --> 00:31:28,400 Speaker 1: benefit the emerging economies, as we believe that economic interdependence 519 00:31:28,600 --> 00:31:31,479 Speaker 1: would lead to less violence around the world. That has 520 00:31:31,520 --> 00:31:34,760 Speaker 1: been very, very successful. But the side product of the 521 00:31:34,760 --> 00:31:37,920 Speaker 1: side that is that hurt the middle class families and 522 00:31:37,920 --> 00:31:40,520 Speaker 1: the working class families in the United States. And so 523 00:31:40,640 --> 00:31:44,959 Speaker 1: these guys they understand the Trump trade philosophy better than anybody, 524 00:31:45,000 --> 00:31:47,080 Speaker 1: and they're gonna go back through these deals and you 525 00:31:47,080 --> 00:31:49,560 Speaker 1: saw what happened to Carrier last night, and go back 526 00:31:49,560 --> 00:31:52,120 Speaker 1: through these deals and re fashion them for the American 527 00:31:52,160 --> 00:31:54,920 Speaker 1: worker and for the American middle class. So that's how 528 00:31:54,960 --> 00:31:58,000 Speaker 1: we're gonna run things. Anthony helped me understand Trump trade policy. 529 00:31:58,080 --> 00:32:00,240 Speaker 1: Every economist I talked to says, when he or she 530 00:32:00,360 --> 00:32:03,680 Speaker 1: is forecasting for the next year, the biggest X factor 531 00:32:03,760 --> 00:32:06,760 Speaker 1: here is what's going to happen with trade. They're worried 532 00:32:06,800 --> 00:32:08,640 Speaker 1: about tariffs. They're worried what that could mean for the 533 00:32:08,680 --> 00:32:11,920 Speaker 1: economy defined for us, what the trade policy is under 534 00:32:11,960 --> 00:32:14,640 Speaker 1: Donald J. Trump. Really, I really feel that people that 535 00:32:14,680 --> 00:32:18,440 Speaker 1: are worried about tariffs are not really understanding the trade policy. 536 00:32:18,560 --> 00:32:20,360 Speaker 1: He talked about it, they talked about him on the 537 00:32:20,360 --> 00:32:23,920 Speaker 1: campaign trail. Well, well, no, we're taking a very superficial view. 538 00:32:23,960 --> 00:32:26,400 Speaker 1: What do you what do you have said about tariffs 539 00:32:26,480 --> 00:32:29,240 Speaker 1: on the view is that he had, I mean, you 540 00:32:29,280 --> 00:32:32,600 Speaker 1: know on the campaign trail is that he would use 541 00:32:32,640 --> 00:32:36,000 Speaker 1: them as a bargaining chip if people did not want 542 00:32:36,000 --> 00:32:39,160 Speaker 1: to go through the formal review process and even up 543 00:32:39,200 --> 00:32:41,680 Speaker 1: these trade deals. And so you know that we've had 544 00:32:41,720 --> 00:32:45,440 Speaker 1: back channel discussions with many many nations at this point. Uh. 545 00:32:45,440 --> 00:32:47,240 Speaker 1: And my guess is is that we are in the 546 00:32:47,280 --> 00:32:51,040 Speaker 1: United States, the largest economy, twenty three point six percent 547 00:32:51,120 --> 00:32:54,840 Speaker 1: of the global GDP our trading partners are going to 548 00:32:54,920 --> 00:32:57,040 Speaker 1: want to deal with us, and I think Mr Trump 549 00:32:57,080 --> 00:32:59,360 Speaker 1: is sending them a message same way he did to 550 00:32:59,400 --> 00:33:02,760 Speaker 1: Carrier over the weekend, Uh, that we want the things 551 00:33:02,760 --> 00:33:04,440 Speaker 1: to be fair, and want the things to be fair 552 00:33:04,480 --> 00:33:07,760 Speaker 1: for the American worker. The tariffs are a last resort 553 00:33:07,840 --> 00:33:12,080 Speaker 1: proposition if people are making a decision that they don't 554 00:33:12,120 --> 00:33:14,680 Speaker 1: want to treat us fairly. And that's really all there 555 00:33:14,760 --> 00:33:17,520 Speaker 1: is to it. And so This is a free fair 556 00:33:17,600 --> 00:33:21,200 Speaker 1: trade proposition by the Trump administration. And I can't think 557 00:33:21,240 --> 00:33:23,720 Speaker 1: of any two better people in the United States the 558 00:33:23,800 --> 00:33:26,880 Speaker 1: prosecute this than Stephen Manuchin and Wilber Ross Anthon. We 559 00:33:26,960 --> 00:33:29,719 Speaker 1: got about thirty seconds left here. Donald Trump tweeting this 560 00:33:29,760 --> 00:33:31,640 Speaker 1: morning that he is going to give a press conference 561 00:33:31,680 --> 00:33:34,840 Speaker 1: on the fifte December talking about leaving his business. What 562 00:33:34,920 --> 00:33:38,160 Speaker 1: does the Trump organization look like come December fift and 563 00:33:38,240 --> 00:33:40,720 Speaker 1: is this in response to criticism of those back channel 564 00:33:40,760 --> 00:33:43,040 Speaker 1: deals you're talking about with foreign governments, worries about conflicts 565 00:33:43,040 --> 00:33:46,360 Speaker 1: of interest? Well, listen, you know we're working super hard 566 00:33:46,400 --> 00:33:49,200 Speaker 1: on this. Someone that not not really mentioned it, Don McGann, 567 00:33:49,200 --> 00:33:52,200 Speaker 1: the White Asse Council. You're going to see Mr Trump 568 00:33:52,240 --> 00:33:56,160 Speaker 1: completely removed from the Trump organization. He's leaving that to 569 00:33:56,280 --> 00:33:59,040 Speaker 1: his children are going to stay in the organization, and 570 00:33:59,080 --> 00:34:01,840 Speaker 1: it will be a very thick wall between the two. 571 00:34:02,200 --> 00:34:03,640 Speaker 1: In fact that what do you mean to say a wall? 572 00:34:04,040 --> 00:34:05,760 Speaker 1: They're not even gonna be talking to each other. As 573 00:34:05,760 --> 00:34:10,719 Speaker 1: as it's a phenomenal trophy business. And my guests is 574 00:34:10,760 --> 00:34:12,719 Speaker 1: the children are gonna do a really good job on 575 00:34:12,760 --> 00:34:14,799 Speaker 1: that business without the dad, and he's going to be 576 00:34:14,800 --> 00:34:18,160 Speaker 1: extremely focused on the American pief All right, Anthony Scaramuchi. 577 00:34:18,239 --> 00:34:21,680 Speaker 1: Remember if Donald Trump's transition team's executive committee, This is Bloomberg. 578 00:34:29,040 --> 00:34:33,399 Speaker 1: Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and 579 00:34:33,480 --> 00:34:38,560 Speaker 1: listen to interviews on iTunes, SoundCloud, or whichever podcast platform 580 00:34:38,680 --> 00:34:42,240 Speaker 1: you prefer. I'm out on Twitter at Tom Keene. David 581 00:34:42,280 --> 00:34:45,920 Speaker 1: Gura is at David Gura. Before the podcast, you can 582 00:34:46,080 --> 00:35:02,520 Speaker 1: always catch us worldwide. I'm Bloomberg Radio. 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