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Speaker 1: Broadcasting live to New York, Gloomberg eleventh will Oh to Washington,

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Speaker 1: d C, Bloomberg one to Boston, Bloomberg twelve liners to

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Speaker 1: Channel one ninety and around the globe the Bloomberg Radio

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Speaker 1: Plus Appen Bloomberg dot com. This is Bloomberg Surveillance. Good morning.

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Speaker 1: I'm camerin Moscow along with Tom Keene and Michael McKee

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Speaker 1: and the opening ballas brought to you by s e

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Speaker 1: I have evolving investor and regulatory demands affected your investment

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Speaker 1: firms operational readiness. Imagine transforming your business with SCI's global

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Speaker 1: platform at se i C dot com slash. Imagine stocks

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Speaker 1: higher at the open. The S and P five hundred

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Speaker 1: up seven tenths per cent or fourteen points to fifteen.

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Speaker 1: Dow Jones Industrial average up seven tenths per cent or

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Speaker 1: one hundred twenty three points to seventeen thousand, two hundred

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Speaker 1: sixty three. Then asked to accept one point one per

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Speaker 1: cent or fifty one points to forty six forty six ten.

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Speaker 1: Your train injury down six thirty seconds. The yels one

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Speaker 1: point four or five percent yield on the two year

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Speaker 1: point six one percent. No, I'm x screwed oil up

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Speaker 1: two point nine percent or a dollar thirty four at

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Speaker 1: forty seven sixty nine a barrel co max schooled on

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Speaker 1: half percent or six dollars thirty cents at thirteen eighteen

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Speaker 1: fifty and outs. The euro is at a dollar ten

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Speaker 1: sixty two, the yen one oh two point four three.

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Speaker 1: The British pounds had a dollar thirty three eight three.

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Speaker 1: That's a Bloomberg business flash. Tom and Mike Cara Masco,

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Speaker 1: thank you very much. I have been waiting for this

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Speaker 1: interview since the of of June, and I don't wanna

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Speaker 1: sound like I am critical this with this with the

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Speaker 1: Veronicas of Australia, they have a new single. But Justin

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Speaker 1: University of Michigan economics professor, one of the smarter people

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Speaker 1: we know, has written extensively about prediction markets, a number

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Speaker 1: of papers about prediction markets, and in the Brexit vote Justin,

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Speaker 1: of course, the prediction markets were horribly wrong. And I

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Speaker 1: just wondered your thoughts on that because we haven't had

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Speaker 1: a chance to talk to you since they since the

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Speaker 1: vote happened. Yeah, so I think there's um, uh maybe

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Speaker 1: make two points. So one is sort of a metaphysical

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Speaker 1: point and the other is a little bit easier to handle. Um,

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Speaker 1: the metaphysical points this. The night before the election, markets

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Speaker 1: said that there was a one in six chance that

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Speaker 1: Leave would win. The thing about one in six chances

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Speaker 1: is there then happen one six at the time. So

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Speaker 1: you know, we're markets wrong to call it a one

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Speaker 1: and sixth chances. You can't tell just off one observation, right,

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Speaker 1: So if I say to you there's a one in

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Speaker 1: sixth chance that when you roll a die it'll come

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Speaker 1: up the six, and then you roll the die and

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Speaker 1: it comes up a five, does that mean I was

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Speaker 1: right or wrong? Um? You know the harder question is

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Speaker 1: the one in six chances come up one six at

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Speaker 1: the time. Um. So that's sort of the metaphysical People

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Speaker 1: never find it particularly satisfying, but you know it it.

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Speaker 1: Think about it another way, which is the markets are saying,

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Speaker 1: we think that Remain is going to win, but we're

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Speaker 1: aware of and we understand our uncertainty here, and we're

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Speaker 1: willing to quantify that uncertainty. And that uncertainty is we

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Speaker 1: think there's a one sixth chance we get it wrong

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Speaker 1: and that at least makes the markets better than most

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Speaker 1: talking heads who will stare straight down the camera and

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Speaker 1: tell you with brock so sol certainty that given the experience,

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Speaker 1: that there's certain that their particular predictions going to happen. Um.

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Speaker 1: The second point I'd make is the case for prediction

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Speaker 1: markets has never been a case that prediction markets are perfect. Um.

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Speaker 1: In fact, the case is simpler than that. It's just

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Speaker 1: that all the ways of predicting elections are terrible, and

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Speaker 1: prediction markets are the least terrible, and the breast election

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Speaker 1: actually fits that pattern exactly right, Which is the pundit's

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Speaker 1: got this wrong, the poll's got this wrong, and prediction

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Speaker 1: markets got this wrong. So we learn that they're all terrible,

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Speaker 1: and what we have to do is look for other

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Speaker 1: evidence to figure out which one is the least terrible.

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Speaker 1: And you know, we got a long run a data

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Speaker 1: over many elections in many countries that says prediction markets

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Speaker 1: are less terrible. Yeah. The problem is, of course, or

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Speaker 1: the problem wasn't this case that an awful lot of

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Speaker 1: money seems to have been invested on the idea that

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Speaker 1: the prediction markets were suggesting something like a chance that

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Speaker 1: the remains side would win tom And I saw that

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Speaker 1: the last number that came out on that was during

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Speaker 1: the trading day on Thursday when the bridge we're voting,

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Speaker 1: and it certainly moved the markets. Uh No, absolutely. I

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Speaker 1: mean there's real information that's out there, and if the

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Speaker 1: information is not moving to prediction markets or financial markets, um,

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Speaker 1: you know that that's a whole different problem again. Um,

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Speaker 1: but you know, uh, I think that the simple scena

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Speaker 1: is it was a really hard election to pick and

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Speaker 1: the list likely one extent and winning, and that sometimes happens.

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Speaker 1: Justin you have a paper out a few years ago,

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Speaker 1: trust in public institutions with a business cycle. Kenna rogof

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Speaker 1: Rights a few days ago on the idea and he

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Speaker 1: calls it, quote, the real lunacy of a fifty hurdle

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Speaker 1: rate referendum is the arch error here that they made

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Speaker 1: quasi constitutional choices with a fifty referendum versus something higher. Yes,

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Speaker 1: So there is a there's another way of putting Ken's point,

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Speaker 1: and I think it's a very important one, um, which

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Speaker 1: is when you have irreversible choices, choices that you could

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Speaker 1: make today or you could make tomorrow, maybe you should

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Speaker 1: think about the rate of return that you want being

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Speaker 1: a little bit higher. So you know, today think exiting

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Speaker 1: is a good idea, that this is a pretty good

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Speaker 1: chance that a majority of them tomorrow will think something different.

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Speaker 1: So a majority of them tomorrow will be pretty cranky

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Speaker 1: about is having locked them out of the u UM.

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Speaker 1: And so if there's a high probability that's morrow's people

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Speaker 1: will be disappointed at decision to think irreversible decisions that

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Speaker 1: yesterday's people made, then you want to set the bar

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Speaker 1: it will higher for today's people to potentially disappoint tomorrow's UM.

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Speaker 1: So I think he's right now, you know, the whole

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Speaker 1: enterprise he was poorly thought through. UM. You know, it

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Speaker 1: was a political stunt that no one expected to get

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Speaker 1: up and win. And then we're all left with nightmare

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Speaker 1: today figure out what the hell it means even to

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Speaker 1: extra after all, what's where would you suggest they go

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Speaker 1: from here? With this? Is if if anywhere, UM are

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Speaker 1: do you just design now the way out? I mean,

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Speaker 1: so one of you know, one of the things that

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Speaker 1: is unclear actually is what the next step is, which

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Speaker 1: is you know, is there some possibility we end up

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Speaker 1: at another referendum? Right? You know, the Brits have actually

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Speaker 1: got a trigger Article fifty before you know, they then

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Speaker 1: start the rest of the process and leave and no

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Speaker 1: one's no one's fired that button yet, just like the

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Speaker 1: pre election promises that they would. There's a long history

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Speaker 1: of throughout European integration and going to referendums and when

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Speaker 1: people give what the elites think is the wrong answer

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Speaker 1: the first time, then they just go back and keep

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Speaker 1: asking until they give the integration stanswer again. Um. So

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Speaker 1: if the Brits didn't do that, it would actually be

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Speaker 1: sort of a reversal of past patterns. You know. Look,

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Speaker 1: I don't think any of us know. There's tremendous pod

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Speaker 1: concert and the over there right now on both the

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Speaker 1: left and the right. Um, but I wouldn't be totally

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Speaker 1: surprised if there weren't an attempt that a do over

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Speaker 1: at some point. Well, that may be interesting, In which case,

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Speaker 1: how is there a way to design a survey or

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Speaker 1: a prediction model that would give us a better result?

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Speaker 1: So try to predict whether, um, you know, they're going

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Speaker 1: to trigger Article fifty or go back and have another referendum.

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Speaker 1: That's a completely different question because they were not asking

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Speaker 1: what is the general will of the people, It is

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Speaker 1: asking what are the actions of the elite it's going

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Speaker 1: to be Um. Generally speaking, I think the prediction markets

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Speaker 1: do a good job at predicting elections because you know,

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Speaker 1: they're aggregating broad based information from voters all around the country.

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Speaker 1: You know, you are walking down the street, you see

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Speaker 1: a bunch of signs, you're at the watercooler, you hear

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Speaker 1: how your colleagues are talking about this, and so on.

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Speaker 1: So I think they generally do a good job when

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Speaker 1: they're trying to predict what the general electorate is going

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Speaker 1: to do. When they're trying to predict what a handful

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Speaker 1: of elites will do, these are decisions that have about

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Speaker 1: smoke filled rooms, and none of the traders are in

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Speaker 1: that room. Um. So that's the case where I think

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Speaker 1: the prediction market is useless. But I think the prediction

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Speaker 1: market makes you tell us, look, it's really hard to know.

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Speaker 1: I think if this is a measure of our uncertain

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Speaker 1: justin Wolfris, thank you so much. Look forward to speaking

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Speaker 1: to you again soon. He is with the University of Michigan.

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Speaker 1: Mike absolutely fascinating there about. He's really the first frontline

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Speaker 1: economist I've said suggesting a second vote. You know, I've

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Speaker 1: had a lot of vacilation. He didn't vasilate. Yeah, well,

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Speaker 1: I mean he's looking at statistically at it, and there

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Speaker 1: are a lot of statistical shortcomings, certainly with the way

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Speaker 1: this was designed. The VIX twenty point four three one

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Speaker 1: of the remarkable things of VIX relatively subdued after what

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Speaker 1: we've seen the last few days. Up a hundred eight

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Speaker 1: points on the doll Let's check it with Michael bar

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Speaker 1: Now and get the latest world in national headlines. Mike Tom,

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Speaker 1: thank you very much. The Republican led panel will release

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Speaker 1: its final report on BEng Ghazi this morning. According to

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Speaker 1: excerpts given to SNANA ahead of the release of the report,

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Speaker 1: Hillary Clinton should have realized that extremists posed a risk

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Speaker 1: to US officials in Libya for the September twenty twelve

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Speaker 1: attacks that killed four Americans, including US Ambassador Chris Stevens.

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Speaker 1: Democrats say that Clinton, who was then Secretary of State,

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Speaker 1: did nothing improper. Hillary Clinton will campaign in Denver today.

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Speaker 1: She will push entrepreneurship. Donald Trump will outlined his trade

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Speaker 1: policies today. British Primnister David Cameron is in Brussels who

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Speaker 1: address an emergency meeting with the European Union. Cameron says

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Speaker 1: the UK may be breaking up with Europe, but he

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Speaker 1: hopes they'll stay friends. Hi very much. I will seek

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Speaker 1: the closest possible relationship in done to trade, had cooperation

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Speaker 1: and security, because that is good for us and that

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Speaker 1: is good for then at That's the spirit in which

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Speaker 1: the discussions of people will be held today. German Chancellor

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Speaker 1: Angler Merkel is hardening earth stands about Britain's Brexit vote.

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Speaker 1: Merkel says the UK can expect favorite treatment once it leaves,

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Speaker 1: and there will be no informal talks on a new

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Speaker 1: relationship before Britain files to leave. Global News twenty four

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Speaker 1: hours a day, powered by more than twenty d journalists

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Speaker 1: and analysts more than a hundred twenty countries. I'm Michael Barr.

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Speaker 1: This is Bloomberg Time. Michael Barr, Thanks so much, Sterling one.

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Speaker 1: It was up Abuba one thirty four, but nevertheless better

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Speaker 1: today off of the last few days carnage the Yen

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Speaker 1: one oh two point four eight Michael McKee and Time Keen. Next,

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Speaker 1: Michael Faroli on America's potential growth. Bloomberg surveillance banks for

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Speaker 1: pushing back their calls on the FED JP Morgan now

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Speaker 1: says December, what's behind that call? Like a parley joined

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Speaker 1: us coming up here on Bloomberg Surveillance on Bloomberg Radio worldwide,