1 00:00:00,080 --> 00:00:12,960 Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leie. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:33,640 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Let's 5 00:00:33,640 --> 00:00:36,280 Speaker 1: Talk About Trade Show. We investors struggling to work out 6 00:00:36,360 --> 00:00:39,279 Speaker 1: just what was agreed in Argentina. Larry Cutolo called them 7 00:00:39,280 --> 00:00:42,680 Speaker 1: commitments that both sides would presumably implement. There was also 8 00:00:42,760 --> 00:00:46,200 Speaker 1: confusion over when the ninety day tariff truce would begin, 9 00:00:46,320 --> 00:00:49,360 Speaker 1: with Cutlos saying January one, which the White House later 10 00:00:49,400 --> 00:00:54,000 Speaker 1: corrected to December one. China has remained largely silent in 11 00:00:54,080 --> 00:00:57,560 Speaker 1: Shepherds and Joint US now Pantheon macro Economics chief Economists, 12 00:00:57,560 --> 00:01:01,320 Speaker 1: So ian just what was agreed? Well, nothing very substantive. 13 00:01:01,720 --> 00:01:05,120 Speaker 1: The the ninety day delayed to the implantation of the 14 00:01:06,040 --> 00:01:08,920 Speaker 1: tariffs was apparently agreed, although that didn't appear in the 15 00:01:09,000 --> 00:01:12,720 Speaker 1: Chinese statement. Uh, and nothing else. An agreement to talk 16 00:01:13,480 --> 00:01:17,640 Speaker 1: h and an agreement to pursue a more sustainable trading relationship. 17 00:01:17,920 --> 00:01:21,880 Speaker 1: But ninety days is nothing like enough. I suspect to 18 00:01:21,959 --> 00:01:25,600 Speaker 1: draw up a fundamental change in China's trading relationship with 19 00:01:25,600 --> 00:01:27,840 Speaker 1: the US. So I guess what we're now hoping for, 20 00:01:27,920 --> 00:01:30,240 Speaker 1: is it in ninety days time or preferably before that 21 00:01:30,440 --> 00:01:32,280 Speaker 1: the can will be kicked a bit further down the 22 00:01:32,319 --> 00:01:35,160 Speaker 1: road and will continue to talk uh, and we won't 23 00:01:35,319 --> 00:01:39,040 Speaker 1: ultimately see the imposition of those tariffs. So markets like 24 00:01:39,360 --> 00:01:41,440 Speaker 1: that bit. But then the closer you look at it, 25 00:01:42,200 --> 00:01:44,440 Speaker 1: the less of real substance that there is. We're getting 26 00:01:44,440 --> 00:01:46,520 Speaker 1: this slow drip feed of more information. There was no 27 00:01:46,640 --> 00:01:49,600 Speaker 1: mention of autos on the statement released by the United 28 00:01:49,600 --> 00:01:52,240 Speaker 1: States or the statement released by China. Then the President 29 00:01:52,240 --> 00:01:54,520 Speaker 1: tweeted about it, and everyone's scrambling to work out what 30 00:01:54,560 --> 00:01:59,080 Speaker 1: the agreement is exactly. Currently the terrorists for it's going 31 00:01:59,120 --> 00:02:01,520 Speaker 1: to be fifteen for the rest of the world. Are 32 00:02:01,560 --> 00:02:03,160 Speaker 1: they talking about coming down to the rest of the 33 00:02:03,160 --> 00:02:05,440 Speaker 1: world or coming down to zero? Well, we don't know 34 00:02:05,480 --> 00:02:09,160 Speaker 1: because China hasn't said so. Jan Ping and his economic 35 00:02:09,360 --> 00:02:12,600 Speaker 1: entourage are still traveling and the silence is kind of deafening. 36 00:02:13,080 --> 00:02:16,519 Speaker 1: So presumably we'll hear something more definitive in due course, 37 00:02:16,600 --> 00:02:19,880 Speaker 1: but right now we're kind of scrambling now from from 38 00:02:19,919 --> 00:02:23,480 Speaker 1: a macro perspective, I think what markets really wanted to 39 00:02:23,520 --> 00:02:26,160 Speaker 1: hear was simply that the tariffs wouldn't be imposed January one, 40 00:02:26,200 --> 00:02:29,080 Speaker 1: which was the original plan. So we're happy about that, 41 00:02:29,320 --> 00:02:31,600 Speaker 1: and from a macro perspective, everything else is kind of detail. 42 00:02:31,639 --> 00:02:34,440 Speaker 1: Though for individual sectors and for autos in particular, that 43 00:02:34,520 --> 00:02:38,480 Speaker 1: potential shift from forty down to fifteen possibly would be 44 00:02:38,480 --> 00:02:41,400 Speaker 1: an enormously big deal, but right now there isn't There 45 00:02:41,480 --> 00:02:43,600 Speaker 1: is no hard information on this. And let's tig into 46 00:02:43,680 --> 00:02:46,920 Speaker 1: your base case for where growth will be in just 47 00:02:46,919 --> 00:02:49,560 Speaker 1: looking at the Bloomberg e CFC, the function on the 48 00:02:49,600 --> 00:02:52,000 Speaker 1: Bloomberg terminal gives me a very quick snapshot of the 49 00:02:52,040 --> 00:02:55,600 Speaker 1: median estimate of Wall Street for growth projections forecast two 50 00:02:55,639 --> 00:02:58,919 Speaker 1: point six percent. We roll over to one point nine 51 00:02:58,960 --> 00:03:02,600 Speaker 1: percent into twenty. Are you in and around those kind 52 00:03:02,600 --> 00:03:05,760 Speaker 1: of figures? Two and a half I think is reasonable, 53 00:03:05,800 --> 00:03:07,920 Speaker 1: But it's it's a year of two halves because I 54 00:03:07,960 --> 00:03:09,320 Speaker 1: think in the second half it will be a great 55 00:03:09,360 --> 00:03:11,919 Speaker 1: deal slower, and so I'm not with the market for twenty. 56 00:03:11,960 --> 00:03:15,120 Speaker 1: I think twenty likely will be quite weak. I wouldn't 57 00:03:15,120 --> 00:03:18,120 Speaker 1: be surprised to see a mild recession. I stressed mild 58 00:03:18,400 --> 00:03:22,520 Speaker 1: in but at this point that is very contingent on 59 00:03:22,560 --> 00:03:26,040 Speaker 1: the trade war not flaring up again and certainly not 60 00:03:26,240 --> 00:03:28,920 Speaker 1: to the point where we end at tariffs are on 61 00:03:28,960 --> 00:03:32,440 Speaker 1: the two billion currently tariff to ten percent, and certainly 62 00:03:32,480 --> 00:03:34,800 Speaker 1: not any tariffs on consumer goods, which is another two 63 00:03:35,240 --> 00:03:38,000 Speaker 1: seventy billion. So this is very much a kind of 64 00:03:38,000 --> 00:03:40,400 Speaker 1: a binary position here that if we do go down 65 00:03:40,440 --> 00:03:42,560 Speaker 1: the rabbit hole on tariffs and then the growth outlook 66 00:03:42,600 --> 00:03:45,400 Speaker 1: will deteriorate in a heartbeat, and that two and a 67 00:03:45,440 --> 00:03:48,200 Speaker 1: half number for next year will become extremely difficult to 68 00:03:48,200 --> 00:03:50,120 Speaker 1: achieve and it will be a real mess. There is 69 00:03:50,160 --> 00:03:52,280 Speaker 1: always something to worry about. I and the latest worry 70 00:03:52,320 --> 00:03:54,680 Speaker 1: of the last twenty four hours once again worries about 71 00:03:54,920 --> 00:03:59,440 Speaker 1: the yield curve resurfacing two year yields, three year yields 72 00:03:59,520 --> 00:04:03,720 Speaker 1: trading slightly above where the five year yielded just a 73 00:04:03,760 --> 00:04:06,160 Speaker 1: little bit of curve in version for the first a 74 00:04:06,200 --> 00:04:08,440 Speaker 1: long time. Yeah, no, it is. It is the first 75 00:04:08,480 --> 00:04:10,160 Speaker 1: time in a long time. I think that to me, 76 00:04:10,360 --> 00:04:12,880 Speaker 1: markets have got shall we say, a little bit ahead 77 00:04:12,880 --> 00:04:16,280 Speaker 1: of themselves on this disinflation story. You know, I don't 78 00:04:16,360 --> 00:04:19,480 Speaker 1: buy the idea that we're heading into a materially lower 79 00:04:19,480 --> 00:04:21,839 Speaker 1: inflation environment in the US because I think the labor 80 00:04:21,920 --> 00:04:24,480 Speaker 1: market is so tight that the wage growth, which really 81 00:04:24,520 --> 00:04:27,000 Speaker 1: is the big driver, is much more likely to head 82 00:04:27,040 --> 00:04:29,440 Speaker 1: north and south for the foreseeable future. I think people 83 00:04:29,440 --> 00:04:31,120 Speaker 1: are putting too much emphasis on the impact of the 84 00:04:31,120 --> 00:04:33,160 Speaker 1: stronger dollar, which, yeah, it pulls down the price of 85 00:04:33,200 --> 00:04:37,280 Speaker 1: imported everything, but most of the CPI is not imported goods. 86 00:04:37,279 --> 00:04:40,640 Speaker 1: It's services. It's about wages. And the housing thing as well, 87 00:04:40,640 --> 00:04:42,239 Speaker 1: which I think has really got a lot of attention, 88 00:04:42,279 --> 00:04:44,760 Speaker 1: the idea of the housing markets rolling over, and it isn't. 89 00:04:44,880 --> 00:04:47,520 Speaker 1: It's softening, it's not rolling. Well. What's interesting about this 90 00:04:47,560 --> 00:04:50,040 Speaker 1: is the dollar has been weaker in the last two sessions, 91 00:04:50,080 --> 00:04:53,000 Speaker 1: crude has been firmer in the last two sessions, yet 92 00:04:53,000 --> 00:04:54,839 Speaker 1: the long end of the treasury curve is bid. I 93 00:04:54,880 --> 00:04:57,360 Speaker 1: see that again this morning. Yeah, because you know, we 94 00:04:57,600 --> 00:04:59,560 Speaker 1: need to see the impact of the of the dollar, 95 00:04:59,600 --> 00:05:02,200 Speaker 1: and I couple of days of a dollar weakening doesn't 96 00:05:02,440 --> 00:05:04,800 Speaker 1: doesn't reverse the seven percent appreciation in the trade way 97 00:05:04,880 --> 00:05:06,920 Speaker 1: to dollar over the last year, and that's really what's 98 00:05:06,920 --> 00:05:10,200 Speaker 1: been pushing down goods prices. The yield that we have. 99 00:05:10,400 --> 00:05:13,160 Speaker 1: What does it signal to our listeners. I think the 100 00:05:13,160 --> 00:05:16,720 Speaker 1: base feel of all our listeners would be it just 101 00:05:16,800 --> 00:05:21,039 Speaker 1: means economic slowdown. Is there another signal there? Well? Economic 102 00:05:21,080 --> 00:05:24,520 Speaker 1: slowdown all lower inflation. And at the moment, I think 103 00:05:24,520 --> 00:05:26,640 Speaker 1: the market is playing with both of those stories. I 104 00:05:27,000 --> 00:05:30,240 Speaker 1: think they might be premature on them both, because you know, 105 00:05:30,560 --> 00:05:32,560 Speaker 1: global growth certainly has lost a bit of its edge. 106 00:05:32,560 --> 00:05:34,040 Speaker 1: How much of that is due to tariffs and how 107 00:05:34,120 --> 00:05:36,240 Speaker 1: much of it is due to China's trend slowdown is 108 00:05:36,320 --> 00:05:40,680 Speaker 1: another question. But the US is strong. Growth here is strong. 109 00:05:40,760 --> 00:05:43,080 Speaker 1: The labor market here is super tight. We have a 110 00:05:43,160 --> 00:05:46,480 Speaker 1: three point seven unemployment rate and we've got zero real 111 00:05:46,640 --> 00:05:52,120 Speaker 1: short have wage increases there are above three percent now 112 00:05:52,320 --> 00:05:55,239 Speaker 1: a couple get more med and than anything else. Yeah, 113 00:05:55,279 --> 00:05:57,599 Speaker 1: you know, when guys like you say wages are people 114 00:05:57,640 --> 00:06:00,839 Speaker 1: are like, are you out of your mind? Way? Wages 115 00:06:00,839 --> 00:06:02,839 Speaker 1: are up. They're not up as much as as a 116 00:06:02,880 --> 00:06:05,919 Speaker 1: lot of people would like, that's for sure. But especially 117 00:06:05,920 --> 00:06:07,040 Speaker 1: if you're in a in a in a part of 118 00:06:07,040 --> 00:06:09,920 Speaker 1: the country where the lab market is even tighter than average, 119 00:06:09,920 --> 00:06:12,359 Speaker 1: and there are some places but unemployments well below three percent, 120 00:06:13,560 --> 00:06:15,919 Speaker 1: wage growth in those places is faster. If you're in 121 00:06:16,160 --> 00:06:19,640 Speaker 1: a very tight sector like transportation trucking. You know, there's 122 00:06:19,640 --> 00:06:22,400 Speaker 1: some big wage games, but not everywhere. Not everyone. Email 123 00:06:22,480 --> 00:06:26,080 Speaker 1: just came in from John unless your city, no one cares. 124 00:06:26,160 --> 00:06:29,240 Speaker 1: Talked to Ian about the sale of Newcastle United. Why 125 00:06:29,279 --> 00:06:31,800 Speaker 1: is it so hard to sell a Premier League football team? 126 00:06:32,080 --> 00:06:34,200 Speaker 1: We want to Sally because the guy, the guy who 127 00:06:34,200 --> 00:06:36,680 Speaker 1: owns it, wants an insane price for it. That's that's 128 00:06:36,720 --> 00:06:39,480 Speaker 1: the problem. Rumors that you were bidding, but you know, 129 00:06:39,680 --> 00:06:42,200 Speaker 1: I mean, I'd love to, but I'm you know, a 130 00:06:42,240 --> 00:06:44,800 Speaker 1: few hundred million short. Is there usually want to Sally? 131 00:06:44,880 --> 00:06:48,839 Speaker 1: And if if I went in with former million in 132 00:06:48,839 --> 00:06:51,440 Speaker 1: a black suitcase this afternoon, he would take it. But 133 00:06:51,440 --> 00:06:52,880 Speaker 1: but known in their right mind and to pay that. 134 00:06:53,080 --> 00:06:55,920 Speaker 1: Let's translate this for the US audience. Is Newcast United 135 00:06:55,960 --> 00:06:57,839 Speaker 1: like the Kansas City Royals. And I say that with 136 00:06:57,880 --> 00:07:01,120 Speaker 1: great respect for the memory of George Brett. I mean, 137 00:07:01,640 --> 00:07:04,280 Speaker 1: is it a smaller market team or it can't compete 138 00:07:04,279 --> 00:07:07,640 Speaker 1: with the you know, one of the big Manchester United 139 00:07:07,680 --> 00:07:09,920 Speaker 1: and the others. It's all about the ownership because the 140 00:07:10,240 --> 00:07:13,200 Speaker 1: ownership then, you know, if you're owned, as Manchester City 141 00:07:13,280 --> 00:07:15,160 Speaker 1: is effectively by the state of ABU Dabbi, you have 142 00:07:15,160 --> 00:07:20,360 Speaker 1: a limitless amount of money to spend. Newcastles owned by 143 00:07:20,400 --> 00:07:24,400 Speaker 1: so Mike Ashley, who runs Newcastle United is a big 144 00:07:24,440 --> 00:07:26,880 Speaker 1: sort of main street retail player as well. He's not 145 00:07:27,000 --> 00:07:29,400 Speaker 1: very popular in that sense either. Tom used to be 146 00:07:29,440 --> 00:07:31,680 Speaker 1: owned by a gentleman called Freddie Shepherd. These were like 147 00:07:31,680 --> 00:07:35,760 Speaker 1: the glory days of Newcastle United in the nineties. Newcastle 148 00:07:35,760 --> 00:07:38,480 Speaker 1: would great transfer records. They would be that good. They 149 00:07:38,520 --> 00:07:41,360 Speaker 1: could compete for the best talent on the planet. Things 150 00:07:41,360 --> 00:07:44,800 Speaker 1: have changed, Things have changed. We've had a negative net 151 00:07:44,840 --> 00:07:46,800 Speaker 1: spend last year. Well are they going to be is 152 00:07:46,840 --> 00:07:50,160 Speaker 1: it the right word relegated? They probably not, because fortunately 153 00:07:50,160 --> 00:07:52,320 Speaker 1: there are three teams worse than us, which is quite 154 00:07:52,320 --> 00:07:54,360 Speaker 1: an achievement. But I think right now that it is 155 00:07:54,360 --> 00:07:57,000 Speaker 1: the case. Well, we measure our teams by economists. I mean, 156 00:07:57,040 --> 00:08:00,880 Speaker 1: I see Blanche Flowers one notch below Shepherdson, Yeah, am 157 00:08:00,880 --> 00:08:03,280 Speaker 1: I right on there? And west Ham Steve Major's team 158 00:08:03,400 --> 00:08:07,920 Speaker 1: beat right now at the weekend. Yeah yeah, but Major 159 00:08:07,960 --> 00:08:11,040 Speaker 1: got the yield call, right, So that's that's that's that's right, 160 00:08:11,160 --> 00:08:13,440 Speaker 1: That's right. Okay, we'll leave it. We can have an 161 00:08:13,440 --> 00:08:18,520 Speaker 1: economist ranking of the Premier League type we should on 162 00:08:18,680 --> 00:08:21,760 Speaker 1: the back of all the teams in the Economists is identified. 163 00:08:21,960 --> 00:08:25,360 Speaker 1: Who's identified with Crystal Palace. Oh, I don't know, although 164 00:08:25,400 --> 00:08:28,600 Speaker 1: we did have a listener right in about Crystal Palace recently. 165 00:08:28,680 --> 00:08:32,240 Speaker 1: So there is a Crystal Michael Crystal Palace, Michael Barr. 166 00:08:32,240 --> 00:08:34,800 Speaker 1: Would that be good? Well? I used to love the 167 00:08:34,800 --> 00:08:36,840 Speaker 1: Pistons when they played at the Palace, but that's another 168 00:08:37,120 --> 00:08:40,679 Speaker 1: that's another story completely. I and Shepherdson thank you so much, 169 00:08:40,720 --> 00:08:44,040 Speaker 1: particularly for your comments for the morning on the protests 170 00:08:44,080 --> 00:08:58,320 Speaker 1: in the press conference in France. Widely knowing that John 171 00:08:58,320 --> 00:09:02,280 Speaker 1: Ferre and I don't get along, but contrary to the belief, 172 00:09:02,320 --> 00:09:05,080 Speaker 1: we actually almost listen to each other. We rarely talk, 173 00:09:05,200 --> 00:09:07,520 Speaker 1: but we listened to each other in the break and 174 00:09:07,559 --> 00:09:10,719 Speaker 1: Iro Jersey with us from Bloomberg Intelligence, just wonderful on 175 00:09:10,840 --> 00:09:13,360 Speaker 1: bonds and this is the Bond interview of the day. 176 00:09:14,440 --> 00:09:18,400 Speaker 1: I was thunderstruck by something that John Farroll said, which 177 00:09:18,480 --> 00:09:21,000 Speaker 1: is it's not where the yield curve is or all 178 00:09:21,000 --> 00:09:24,559 Speaker 1: these dynamics, it's the way we're getting there. Just seems 179 00:09:24,679 --> 00:09:30,160 Speaker 1: so odd right now? How odd is it? So? Well, 180 00:09:30,640 --> 00:09:34,319 Speaker 1: so the headlines aren't basically keeping up with the with 181 00:09:34,679 --> 00:09:37,760 Speaker 1: what the markets doing. The market is someone saying by 182 00:09:37,800 --> 00:09:42,280 Speaker 1: a bond yield, lower price higher correct, and and you 183 00:09:42,280 --> 00:09:45,440 Speaker 1: wouldn't expect that given what's happened with equities, given you know, 184 00:09:45,520 --> 00:09:48,640 Speaker 1: the um some of the some of the headlines that 185 00:09:48,720 --> 00:09:50,880 Speaker 1: came out over the weekend with you know, maybe an 186 00:09:50,880 --> 00:09:53,000 Speaker 1: easing of trade tensions, even though that that seems to 187 00:09:53,040 --> 00:09:55,640 Speaker 1: be um, you know, walking back a little bit um, 188 00:09:55,640 --> 00:09:57,880 Speaker 1: but you would have expected at least I would have 189 00:09:57,880 --> 00:10:01,760 Speaker 1: expected some steepening and probably bear steepening. So basically ten 190 00:10:01,840 --> 00:10:04,079 Speaker 1: year yields, thirty year yields selling off. But instead we're 191 00:10:04,080 --> 00:10:07,000 Speaker 1: getting exactly the opposite. So why is that, Well, that's 192 00:10:07,000 --> 00:10:10,920 Speaker 1: the market telling you that they're skeptical that economy and 193 00:10:11,600 --> 00:10:14,520 Speaker 1: the economy and inflation are likely to be significantly higher 194 00:10:14,760 --> 00:10:16,480 Speaker 1: in the future than they are now. But I mean, 195 00:10:16,520 --> 00:10:18,480 Speaker 1: these moves are not massive, right, We're talking about a 196 00:10:18,480 --> 00:10:20,319 Speaker 1: few basis points. It's not like this is a major 197 00:10:21,480 --> 00:10:24,199 Speaker 1: I'm gonna do my stand fisher here on a percentage 198 00:10:24,240 --> 00:10:26,960 Speaker 1: change basis. These are big deals. We've gone from twenty 199 00:10:27,000 --> 00:10:30,400 Speaker 1: two to thirteen beeps on the two stents spread. That's 200 00:10:30,440 --> 00:10:33,960 Speaker 1: not massive. So if you think about it from a 201 00:10:34,160 --> 00:10:36,360 Speaker 1: from a total return perspective depending on how you you 202 00:10:36,440 --> 00:10:39,560 Speaker 1: size your risk. If you did that in say, you know, 203 00:10:39,600 --> 00:10:43,160 Speaker 1: buying fifty million of one and and um and ten 204 00:10:43,200 --> 00:10:47,240 Speaker 1: million of another, then um, you wind up with you know, 205 00:10:47,320 --> 00:10:50,040 Speaker 1: reasonable returns. But it's not it's not going to make 206 00:10:50,040 --> 00:10:52,400 Speaker 1: your year, right, that's not what's something that's going to 207 00:10:52,480 --> 00:10:54,360 Speaker 1: make your year. But you know, if you had that 208 00:10:54,440 --> 00:10:57,120 Speaker 1: trade right, you did well. Obviously I don't know how 209 00:10:57,160 --> 00:10:59,000 Speaker 1: many people were, which I think might be one of 210 00:10:59,000 --> 00:11:01,040 Speaker 1: the reasons that this is a ring that people were 211 00:11:01,040 --> 00:11:03,320 Speaker 1: in steep Nurse. The only thing that made my year 212 00:11:03,440 --> 00:11:06,280 Speaker 1: was when John Ferrell canceled his two egg vocation. That's 213 00:11:06,280 --> 00:11:07,960 Speaker 1: what the British do. Do you know? It's sound one 214 00:11:08,040 --> 00:11:11,480 Speaker 1: year anniversary today? Did you know? That? Is it? And 215 00:11:11,640 --> 00:11:13,720 Speaker 1: I didn't get you guys a car one year on 216 00:11:13,920 --> 00:11:18,559 Speaker 1: Bloomberg Surveillance Radio together. Yeah, O cake. Nothing. I thought 217 00:11:18,600 --> 00:11:22,200 Speaker 1: they'd bringing us a cake, but nothing. I didn't get anything. 218 00:11:23,040 --> 00:11:26,200 Speaker 1: Don't I get a reward for this for last than 219 00:11:26,240 --> 00:11:31,079 Speaker 1: a year? The wise really interesting. I just want to 220 00:11:31,120 --> 00:11:32,880 Speaker 1: have a look at what we're now sort of signaling 221 00:11:32,880 --> 00:11:34,680 Speaker 1: for people, because I think for a lot of equity 222 00:11:34,679 --> 00:11:37,920 Speaker 1: investors they've been conditioned to worry about this a great deal. 223 00:11:38,559 --> 00:11:41,640 Speaker 1: Inversion from front to belly, So from sort of the 224 00:11:41,679 --> 00:11:45,199 Speaker 1: two year space into the five year is actually quite 225 00:11:45,280 --> 00:11:48,599 Speaker 1: normal at this kind of time. It's quite normal for 226 00:11:48,640 --> 00:11:49,959 Speaker 1: a lot of people to be thinking about. Just to 227 00:11:50,000 --> 00:11:51,760 Speaker 1: help them get their heads around it, that's what you 228 00:11:51,800 --> 00:11:55,360 Speaker 1: expect to happen first, correct, and then several years later 229 00:11:55,520 --> 00:11:58,160 Speaker 1: is really when you start to see the economy rollover right, 230 00:11:58,200 --> 00:12:00,520 Speaker 1: and more importantly, I think, is when you wind up 231 00:12:00,520 --> 00:12:02,800 Speaker 1: getting the whole curve in version. Right. So when twos 232 00:12:02,840 --> 00:12:05,400 Speaker 1: to tend to the two years to the tenure inverts, 233 00:12:05,440 --> 00:12:08,360 Speaker 1: that's kind of been the signal in the past. It said, um, 234 00:12:08,480 --> 00:12:11,640 Speaker 1: you know, eighteen months later you expect a recession, um. 235 00:12:11,720 --> 00:12:14,400 Speaker 1: And but that only happens in this environment if the 236 00:12:14,400 --> 00:12:16,760 Speaker 1: Fed goes too far. So right now we're pricing for 237 00:12:16,800 --> 00:12:19,000 Speaker 1: a December hike, We're pricing for one hike in two 238 00:12:19,040 --> 00:12:22,480 Speaker 1: thousand nineteen. Unless the Fed goes more than that, then 239 00:12:22,520 --> 00:12:26,000 Speaker 1: inverting that whole curve is will probably be avoided. That 240 00:12:26,080 --> 00:12:28,760 Speaker 1: being said, and as Tom noted, you know, the curve 241 00:12:28,840 --> 00:12:31,120 Speaker 1: has flattened quite a lot the last couple of days, 242 00:12:31,160 --> 00:12:34,280 Speaker 1: and that's really something that I think some people are 243 00:12:34,280 --> 00:12:36,280 Speaker 1: going to be concerned with in the long term. But 244 00:12:36,559 --> 00:12:39,320 Speaker 1: it's also saying I think at some level that we 245 00:12:39,400 --> 00:12:41,320 Speaker 1: think that the FED is going to stop, and we 246 00:12:41,400 --> 00:12:43,320 Speaker 1: do think that at some point in the next ten 247 00:12:43,400 --> 00:12:45,240 Speaker 1: years we're going to see your recess. So this rise 248 00:12:45,320 --> 00:12:46,760 Speaker 1: is a big question for a lot of people. I 249 00:12:46,760 --> 00:12:48,400 Speaker 1: know some people will be trying to gain this and 250 00:12:48,440 --> 00:12:51,480 Speaker 1: it's incredibly difficult to do. We started to think about 251 00:12:51,480 --> 00:12:53,600 Speaker 1: when the next right cup comes, and I'm not talking 252 00:12:53,640 --> 00:12:55,360 Speaker 1: about in the next twelve months, but when you start 253 00:12:55,400 --> 00:12:57,719 Speaker 1: to think out where the next right cup comes, you're 254 00:12:57,760 --> 00:13:00,439 Speaker 1: looking across the treasury curve to work out where in 255 00:13:00,520 --> 00:13:03,840 Speaker 1: the curve looks cheap relative to the idea that say, 256 00:13:03,880 --> 00:13:06,800 Speaker 1: the five year ultimately becomes where the Fed funds right 257 00:13:06,960 --> 00:13:09,160 Speaker 1: is because that maturity will be what you want to 258 00:13:09,160 --> 00:13:11,200 Speaker 1: buy when they sort of cut right. So why are 259 00:13:11,200 --> 00:13:14,360 Speaker 1: we thinking on the curve the think looks cheap where 260 00:13:14,400 --> 00:13:16,680 Speaker 1: really in several years time is going to be most 261 00:13:16,760 --> 00:13:19,040 Speaker 1: lightly impacted by right cut. So when you look at 262 00:13:19,040 --> 00:13:21,440 Speaker 1: the the overnight index swap market, which is based on 263 00:13:21,440 --> 00:13:23,960 Speaker 1: where the FED funds rate is expected to be at 264 00:13:24,000 --> 00:13:26,640 Speaker 1: some period of time, we're not pricing that right now 265 00:13:26,960 --> 00:13:30,839 Speaker 1: UM basically at all um so, but we're basically saying 266 00:13:30,840 --> 00:13:33,439 Speaker 1: in two thousand nineteen, the market saying in two thousand nineteen, 267 00:13:33,440 --> 00:13:36,839 Speaker 1: the Fed's gonna stop, We're gonna stay there four years, right, 268 00:13:36,880 --> 00:13:38,559 Speaker 1: And that's one reason why you can have this flat 269 00:13:38,640 --> 00:13:41,680 Speaker 1: curve from two year to five year UM. And you 270 00:13:41,720 --> 00:13:44,560 Speaker 1: know there is some chance maybe in twenty one that 271 00:13:44,559 --> 00:13:46,880 Speaker 1: they'll cut, but the market tends not the price for 272 00:13:46,880 --> 00:13:50,079 Speaker 1: that until there's a little bit more visibility into UM 273 00:13:50,320 --> 00:13:52,320 Speaker 1: into things that far out. The market tends to be 274 00:13:52,320 --> 00:13:54,480 Speaker 1: pretty good at the next two years, not so good 275 00:13:54,480 --> 00:13:57,640 Speaker 1: when you get significant further all these generations away from 276 00:13:57,640 --> 00:14:00,960 Speaker 1: full faith and credit. The you know, his corporate act 277 00:14:01,000 --> 00:14:03,960 Speaker 1: in the same way yields into so corporate well yields 278 00:14:03,960 --> 00:14:06,199 Speaker 1: are yields and corporates have come down a little bit, 279 00:14:06,200 --> 00:14:08,040 Speaker 1: but that's mainly because of the rate move, it's not 280 00:14:08,080 --> 00:14:11,480 Speaker 1: because of spreads. So corporate spreads haven't really moved a 281 00:14:11,520 --> 00:14:13,800 Speaker 1: whole heck of a lot recently. What are find portfolio 282 00:14:13,920 --> 00:14:16,280 Speaker 1: is doing right now? You know, what's a typical total 283 00:14:16,360 --> 00:14:20,000 Speaker 1: return fund manager doing besides a yeah, so you know 284 00:14:20,040 --> 00:14:22,280 Speaker 1: a lot of people I think had had pretty poor 285 00:14:22,360 --> 00:14:24,880 Speaker 1: years just because of what's happened, you know in uh 286 00:14:25,240 --> 00:14:27,960 Speaker 1: UM in the market with significant sell off. So earlier 287 00:14:28,000 --> 00:14:29,480 Speaker 1: in the year, a total return for a lot of 288 00:14:29,480 --> 00:14:32,440 Speaker 1: total return managers did very well because they were underweight 289 00:14:32,520 --> 00:14:34,920 Speaker 1: duration there or might might have been short interest rates. 290 00:14:34,920 --> 00:14:36,800 Speaker 1: And when interest rates went up they did very well. 291 00:14:37,120 --> 00:14:40,160 Speaker 1: But they kept that view instead of instead of reversing 292 00:14:40,160 --> 00:14:42,360 Speaker 1: it um. But you look at you look at things 293 00:14:42,400 --> 00:14:47,680 Speaker 1: like speculative um positioning in treasury futures, and and everyone 294 00:14:47,800 --> 00:14:50,600 Speaker 1: was so massively short. In fact, just about six weeks 295 00:14:50,600 --> 00:14:55,040 Speaker 1: ago they hit the shortest ever. Now they've cut that 296 00:14:55,040 --> 00:14:57,760 Speaker 1: short by almost half. Don't be a stranger. This was great. 297 00:14:57,800 --> 00:15:00,360 Speaker 1: This will be out on podcast Ira Jersey with your 298 00:15:00,440 --> 00:15:04,040 Speaker 1: bond briefing for the day. This is just great for 299 00:15:04,120 --> 00:15:19,720 Speaker 1: Global Wall Street. John, this is great. Kevin Book writes 300 00:15:19,760 --> 00:15:24,560 Speaker 1: in English on oil at clear View Energy and he 301 00:15:24,680 --> 00:15:29,440 Speaker 1: calls it green span on the Danube. That green span 302 00:15:29,640 --> 00:15:32,160 Speaker 1: on the Danube. What we're gonna see out of Vienna 303 00:15:32,760 --> 00:15:35,360 Speaker 1: and a Marie Horden with that great Saudi Arabian interview 304 00:15:35,400 --> 00:15:38,520 Speaker 1: earlier today, we would not be surprised to find a 305 00:15:38,560 --> 00:15:44,160 Speaker 1: brain twisting, circumlocutive jumble of word jazz from the clarinet 306 00:15:44,240 --> 00:15:47,640 Speaker 1: is similar to some of the more obtrue statements that 307 00:15:47,800 --> 00:15:52,560 Speaker 1: former FED Chairman Alan Greenspan issued during his uh A tenure. Kevin, 308 00:15:52,600 --> 00:15:55,520 Speaker 1: that's a great way to put it within the verbi edge. 309 00:15:55,600 --> 00:16:00,200 Speaker 1: What are we gonna look for from the cartel? Good 310 00:16:00,200 --> 00:16:02,600 Speaker 1: morning time. I think the number is what we're looking for, 311 00:16:02,720 --> 00:16:05,880 Speaker 1: and the number that won't inflame President Trump is why 312 00:16:05,880 --> 00:16:09,320 Speaker 1: it comes in code one point four million. Is that 313 00:16:09,520 --> 00:16:13,000 Speaker 1: I think in a pretty consensus expectations for what it'll 314 00:16:13,040 --> 00:16:16,000 Speaker 1: take to balance the market. It helps to have Canada 315 00:16:16,080 --> 00:16:19,120 Speaker 1: pulling oil off the market itself. It helps to have 316 00:16:19,160 --> 00:16:23,200 Speaker 1: a slightly tighter Iran supply picture showing up in the numbers. 317 00:16:23,200 --> 00:16:25,280 Speaker 1: But at one point for is what we're looking for, 318 00:16:25,360 --> 00:16:28,160 Speaker 1: a one point four coordinated cut, Kevin. To be clear here, 319 00:16:28,200 --> 00:16:30,160 Speaker 1: do you think that press release could be for an 320 00:16:30,200 --> 00:16:35,080 Speaker 1: audience of one? Well, it's never just for an audience 321 00:16:35,120 --> 00:16:37,080 Speaker 1: of one, but I think it's going to be worded 322 00:16:37,120 --> 00:16:41,880 Speaker 1: with a particular wariness for that one. That's fascinating to 323 00:16:41,920 --> 00:16:44,920 Speaker 1: me that the President has this must impact on opaque, 324 00:16:44,920 --> 00:16:48,520 Speaker 1: the cartel, not just the Saudias. How will the other 325 00:16:48,600 --> 00:16:53,440 Speaker 1: individual groups, countries, nations respond? To the pressure the Saudias 326 00:16:53,520 --> 00:16:58,480 Speaker 1: arunta to do this. As you know, it's never easy, uh. 327 00:16:58,600 --> 00:17:02,600 Speaker 1: There's there's always big contributions from the kingdom uh, and 328 00:17:02,640 --> 00:17:06,000 Speaker 1: then pennies from some of the others. In this particular case, 329 00:17:06,080 --> 00:17:08,840 Speaker 1: it's it's also a question of persuading Russia to stay 330 00:17:08,920 --> 00:17:11,920 Speaker 1: in the game. For for Russia, right now, this is 331 00:17:11,960 --> 00:17:15,480 Speaker 1: still looking like good economic self interest. But as you 332 00:17:15,480 --> 00:17:17,720 Speaker 1: start to see the see the peeling a way of 333 00:17:17,760 --> 00:17:20,480 Speaker 1: cutter and start to ask whether or not this is 334 00:17:20,560 --> 00:17:23,000 Speaker 1: really going to stay in Russia's long term self in 335 00:17:23,080 --> 00:17:25,240 Speaker 1: First it has to do with whether or not there's 336 00:17:25,240 --> 00:17:28,840 Speaker 1: a new regional realignment taking place, and whether Russia's other 337 00:17:28,880 --> 00:17:34,280 Speaker 1: economic goals including selling nuclear power plants and natural gas 338 00:17:34,320 --> 00:17:37,879 Speaker 1: and other aspects of their their portfolio to Turkey and 339 00:17:38,040 --> 00:17:41,240 Speaker 1: other partners in the region, start to predominate. For now, 340 00:17:41,320 --> 00:17:43,880 Speaker 1: it looks like coordination high five goes a long way 341 00:17:43,920 --> 00:17:46,800 Speaker 1: towards setting expectation, So Kevin and high five. But it's 342 00:17:46,800 --> 00:17:49,560 Speaker 1: easy to high five when you boast boosting output at 343 00:17:49,560 --> 00:17:52,160 Speaker 1: record amounts. I mean, we've got record production in Russia, 344 00:17:52,240 --> 00:17:55,280 Speaker 1: record production and Saudi arab but what would you consider 345 00:17:55,359 --> 00:17:59,080 Speaker 1: a material cut? Going back to the levels of before 346 00:17:59,119 --> 00:18:01,160 Speaker 1: the summer, going to the levels of ELIO this year. 347 00:18:01,200 --> 00:18:05,080 Speaker 1: What would a real cut be, thorough peck Well, the 348 00:18:05,119 --> 00:18:08,040 Speaker 1: real concern is that they might undercut relative to where 349 00:18:08,080 --> 00:18:12,080 Speaker 1: demand might take us. We have a fairly barished demand outlook, 350 00:18:12,160 --> 00:18:15,960 Speaker 1: just thinking about the frictional impacts of the nascent trade war. 351 00:18:16,320 --> 00:18:18,840 Speaker 1: It's hard to prove. We can't see the investments that 352 00:18:18,960 --> 00:18:22,439 Speaker 1: don't happen, you can't see the demand that didn't materialize, 353 00:18:22,640 --> 00:18:26,080 Speaker 1: and downward convisions are the stuff of oil analysis, right 354 00:18:26,160 --> 00:18:29,719 Speaker 1: but still sorry, go on, no, no, it's fine, I'm listening. 355 00:18:29,840 --> 00:18:32,840 Speaker 1: I'm I'm loving it, Kevin book. But the the issue Kevin, 356 00:18:33,560 --> 00:18:36,960 Speaker 1: for me is six weeks ago we were talking about 357 00:18:36,960 --> 00:18:38,760 Speaker 1: a bond market that was going to go to three 358 00:18:38,760 --> 00:18:41,320 Speaker 1: and a half per cent tenure. Eight weeks ago, you 359 00:18:41,400 --> 00:18:44,000 Speaker 1: tell me exactly oil was going to a hundred dollars 360 00:18:44,000 --> 00:18:47,960 Speaker 1: of barrel. These these fancy people show up in Vienna, 361 00:18:48,480 --> 00:18:50,720 Speaker 1: and am I right that they're showing up within a 362 00:18:50,720 --> 00:18:54,720 Speaker 1: cacophony of instability? I mean, do they have any clue 363 00:18:54,720 --> 00:19:00,320 Speaker 1: what the underlying microeconomics are. I think that there's nobody, 364 00:19:00,520 --> 00:19:04,160 Speaker 1: nobody is particularly comfortable with the the instability of an 365 00:19:04,240 --> 00:19:09,080 Speaker 1: unsynchronized global growth picture. Uh, the idea of oil war 366 00:19:09,480 --> 00:19:13,080 Speaker 1: roaring ahead as we all go straight into the you know, 367 00:19:13,119 --> 00:19:16,240 Speaker 1: the three and a half four percent sugar juice vp 368 00:19:16,440 --> 00:19:19,800 Speaker 1: HI of the United States. That's over right. So we 369 00:19:19,880 --> 00:19:22,560 Speaker 1: have such an incredibly strong GDP linkage in the non 370 00:19:22,560 --> 00:19:24,800 Speaker 1: O E C d H. In addition to that, there's 371 00:19:24,880 --> 00:19:28,640 Speaker 1: growing price sensitivity and some of those non consumers recruit. 372 00:19:28,960 --> 00:19:32,280 Speaker 1: So when you start to see China respond to high prices, 373 00:19:32,480 --> 00:19:35,760 Speaker 1: when you see currency adjusted acquisition costs tamping down demand, 374 00:19:36,040 --> 00:19:40,280 Speaker 1: when you see effective trade stagnation, if not outright war 375 00:19:40,640 --> 00:19:44,119 Speaker 1: starting to crimp investment, those are the warning signs that 376 00:19:44,200 --> 00:19:46,600 Speaker 1: made me think, gosh, you know, maybe maybe things are 377 00:19:46,600 --> 00:19:48,480 Speaker 1: a little weaker out there for well than we thought. 378 00:19:48,800 --> 00:19:50,840 Speaker 1: What happens with the U s off the Bank of 379 00:19:50,840 --> 00:19:54,640 Speaker 1: the outpect decision this week, Well, the brakes are off 380 00:19:54,920 --> 00:19:57,560 Speaker 1: a lot worse than the accelerator. The problem with shale 381 00:19:57,920 --> 00:20:01,160 Speaker 1: is that the latency takes a while. The on the downside, 382 00:20:01,560 --> 00:20:04,280 Speaker 1: we saw we saw what happened in it was you know, 383 00:20:04,320 --> 00:20:07,080 Speaker 1: six to nine months in some formations for things really 384 00:20:07,119 --> 00:20:10,439 Speaker 1: slowed down. And how quickly can zip back to answer 385 00:20:10,480 --> 00:20:13,360 Speaker 1: the call from demand when it resurfaces. So I think 386 00:20:13,400 --> 00:20:17,200 Speaker 1: you probably are in some ways blessed by the constraints 387 00:20:17,280 --> 00:20:19,560 Speaker 1: coming out of some of the most prolific producing areas 388 00:20:19,600 --> 00:20:22,639 Speaker 1: like Permian. At this point it's not that easy to 389 00:20:22,680 --> 00:20:25,520 Speaker 1: get the additional group to market. Uh. That makes some 390 00:20:25,600 --> 00:20:28,560 Speaker 1: of the costs an issue. But once those wells start, 391 00:20:28,800 --> 00:20:31,120 Speaker 1: people are going to run those wells. I can interview 392 00:20:31,200 --> 00:20:33,000 Speaker 1: US production. Just to be clear, though the rick count 393 00:20:33,000 --> 00:20:36,439 Speaker 1: has never recovered from the collapse, has it? Is this 394 00:20:36,520 --> 00:20:41,480 Speaker 1: a region regions that are doing more with less? Absolutely 395 00:20:41,600 --> 00:20:43,720 Speaker 1: it didn't need to recover because they're getting more out 396 00:20:43,720 --> 00:20:46,680 Speaker 1: of the ground with fewer rigs. Doing more with less 397 00:20:46,720 --> 00:20:50,520 Speaker 1: is terrific. Higher efficiency wells are terrific. Remember those wells 398 00:20:50,600 --> 00:20:53,119 Speaker 1: run right, We don't We don't shut stuff off. Spare 399 00:20:53,160 --> 00:20:58,959 Speaker 1: capacity isn't for for US producers. What is the likelihood 400 00:20:59,200 --> 00:21:03,720 Speaker 1: or probable of the I should say, of revisiting of 401 00:21:03,760 --> 00:21:06,760 Speaker 1: barrel I have not asked that question folks since the 402 00:21:06,840 --> 00:21:09,320 Speaker 1: hundred You know the dash to a hundred dollars a barrel? 403 00:21:09,359 --> 00:21:13,600 Speaker 1: But who says words stasis here? I mean review how 404 00:21:13,680 --> 00:21:17,000 Speaker 1: we got the thirty dollars a barrel and could it 405 00:21:17,160 --> 00:21:22,399 Speaker 1: happen right now? Well, yes, of course. The will market 406 00:21:22,400 --> 00:21:25,080 Speaker 1: has a wide range, and it's demonstrated. I mean it's 407 00:21:25,119 --> 00:21:27,359 Speaker 1: it's operatic in its range, all the way from the 408 00:21:27,400 --> 00:21:30,639 Speaker 1: highest to the loads. A thrilling show. But look, the 409 00:21:30,920 --> 00:21:33,800 Speaker 1: reality is that at this point we still have some 410 00:21:33,880 --> 00:21:37,199 Speaker 1: fairly robust consumption going on in the world. Uh, it 411 00:21:37,440 --> 00:21:41,960 Speaker 1: isn't obvious that you're all the way down to bleakness. 412 00:21:42,880 --> 00:21:46,480 Speaker 1: You also had the Kingdom unwilling to take action and 413 00:21:46,520 --> 00:21:49,040 Speaker 1: to muscle up and say all right, let's cut. They 414 00:21:49,080 --> 00:21:52,800 Speaker 1: thought they would flood, and flood they did. As production 415 00:21:52,880 --> 00:21:56,520 Speaker 1: continued to flow out of out of the US producers, 416 00:21:56,560 --> 00:21:59,960 Speaker 1: the Kingdom didn't stop. Now they've taken a more activist role. Kevin, 417 00:22:00,000 --> 00:22:02,120 Speaker 1: I want to hit the final point that we haven't 418 00:22:02,119 --> 00:22:05,480 Speaker 1: touched on just yet. I had no idea that Canada 419 00:22:05,760 --> 00:22:09,320 Speaker 1: could join the cutting crew. How is that possible that 420 00:22:09,359 --> 00:22:11,080 Speaker 1: they even have the ability to do this, to tell 421 00:22:11,119 --> 00:22:16,119 Speaker 1: a region effectively to shut it down a little bit. Well, 422 00:22:16,160 --> 00:22:18,480 Speaker 1: there's there's a lot to be said for what it 423 00:22:18,640 --> 00:22:20,560 Speaker 1: what it means to be Canadian and to be so 424 00:22:20,640 --> 00:22:24,080 Speaker 1: heavily dependent in the Western Canada sedimentary base and on 425 00:22:24,160 --> 00:22:27,439 Speaker 1: the fruits of production. Uh, these are the kinds of 426 00:22:27,480 --> 00:22:30,760 Speaker 1: actions that are are dire. But when you saw differentials 427 00:22:30,800 --> 00:22:34,040 Speaker 1: to w T I, you know, forty up for West 428 00:22:34,080 --> 00:22:37,360 Speaker 1: Canada select, I think that speaks to to why there's 429 00:22:37,480 --> 00:22:40,679 Speaker 1: there's a sense of intervention. Technically, the Canadian people are 430 00:22:40,760 --> 00:22:44,800 Speaker 1: owners stakeholders to the oil production in their country. There's 431 00:22:44,880 --> 00:22:48,320 Speaker 1: there's tax flows, there's other secondary revenue streams. It's the 432 00:22:48,400 --> 00:22:51,840 Speaker 1: kind of thing that it definitely it doesn't feel quite 433 00:22:51,840 --> 00:22:56,800 Speaker 1: like capitalism, but then again, you know, not much does sometimes. 434 00:22:57,000 --> 00:22:59,240 Speaker 1: Kevin has been a huge valuable Kevin book, Thank you 435 00:22:59,320 --> 00:23:01,800 Speaker 1: so much, with clear view energy, with a briefing on 436 00:23:01,920 --> 00:23:13,359 Speaker 1: the vicissitudes. As they say, I'm we are thrilled to 437 00:23:13,480 --> 00:23:16,240 Speaker 1: end strong hero on Bloomberg Surveillance today with m Ross 438 00:23:16,240 --> 00:23:20,480 Speaker 1: Thomas driving forward all of our Brexit coverage, Emma, I 439 00:23:20,600 --> 00:23:25,960 Speaker 1: was thunderstruck by the scathing critique of the former Governor 440 00:23:26,119 --> 00:23:29,720 Speaker 1: of the Bank of England against Prime Minister May. The 441 00:23:29,800 --> 00:23:34,119 Speaker 1: headline of the Bloomberg opinion piece May's Brexit deal is 442 00:23:34,160 --> 00:23:38,520 Speaker 1: a betrayal of Britain. Did you see this coming from 443 00:23:38,560 --> 00:23:42,040 Speaker 1: Irvin King? The criticism that is already sort of out 444 00:23:42,040 --> 00:23:44,360 Speaker 1: there on both sides of it are Brexit debate, which 445 00:23:44,400 --> 00:23:46,480 Speaker 1: is that this deal not only is it the worst 446 00:23:46,520 --> 00:23:49,000 Speaker 1: of both worlds, but that it's sort of somehow trapped 447 00:23:49,080 --> 00:23:53,760 Speaker 1: the UK within the euse orbit um and that really know, 448 00:23:53,840 --> 00:23:56,199 Speaker 1: it's all from the very beginning. This is about the 449 00:23:56,240 --> 00:24:00,159 Speaker 1: Irish backstop and you know the problem of how to 450 00:24:00,200 --> 00:24:02,120 Speaker 1: deal with the Irish border, and that is what we're 451 00:24:02,160 --> 00:24:04,040 Speaker 1: still fighting about. And even you though we had in 452 00:24:04,040 --> 00:24:07,120 Speaker 1: Parliament yesterday, we had Olie Robbins who negotiated this thing, 453 00:24:07,560 --> 00:24:10,440 Speaker 1: and even he was there saying, yeah, the backstops uncomfortable. 454 00:24:10,440 --> 00:24:12,000 Speaker 1: You know, if we go if we end up going 455 00:24:12,000 --> 00:24:15,480 Speaker 1: into this, it's not great. And you know, that really 456 00:24:15,600 --> 00:24:19,600 Speaker 1: is why Thereason is on course to lose the vote 457 00:24:19,920 --> 00:24:22,119 Speaker 1: according to all indications. You know that she's going to 458 00:24:22,200 --> 00:24:25,280 Speaker 1: lose the vote next week because you know, the negotiated 459 00:24:25,320 --> 00:24:26,760 Speaker 1: something that a lot of people on both sides and 460 00:24:26,800 --> 00:24:30,320 Speaker 1: seeing as a trap. Buried in the heat of this 461 00:24:30,560 --> 00:24:35,160 Speaker 1: essay is a single paragraph but a citing Paul Krugman, 462 00:24:35,200 --> 00:24:38,439 Speaker 1: the Nobel Laureate, that the analysis of the Bank of 463 00:24:38,480 --> 00:24:42,240 Speaker 1: England is correct in that these are long term effects. 464 00:24:42,640 --> 00:24:46,040 Speaker 1: The Brexiteers would say these are one off effects that 465 00:24:46,160 --> 00:24:50,760 Speaker 1: the United Kingdom can recover from. Discuss that debate right 466 00:24:50,760 --> 00:24:54,000 Speaker 1: now in the United Kingdom is there a permanence to 467 00:24:54,119 --> 00:25:01,840 Speaker 1: Brexit effects? Right? So I suppose the debate here very 468 00:25:01,920 --> 00:25:07,240 Speaker 1: much is about um whether forecasts are are worth anything. 469 00:25:07,359 --> 00:25:09,520 Speaker 1: You know, we had projects here with with with the 470 00:25:09,560 --> 00:25:12,040 Speaker 1: referend campaign in twenty sixteen, the Bank of England came out, 471 00:25:12,040 --> 00:25:14,640 Speaker 1: everyone came out and said that, you know, vote UM 472 00:25:14,680 --> 00:25:18,280 Speaker 1: to leave would have disasters consequences for the economy that 473 00:25:18,520 --> 00:25:21,920 Speaker 1: didn't play out at least immediately, partly of course, because 474 00:25:21,920 --> 00:25:24,119 Speaker 1: Breast hasn't actually happened yet. And so really the debate 475 00:25:24,160 --> 00:25:26,200 Speaker 1: here is about how reliable their talks are and also 476 00:25:26,240 --> 00:25:29,320 Speaker 1: about the you know, the Bank of England weighing into 477 00:25:30,280 --> 00:25:32,680 Speaker 1: what is essentially a political debate. And I think that's 478 00:25:32,680 --> 00:25:34,720 Speaker 1: what was interesting about the Mermen king comments is sort 479 00:25:34,720 --> 00:25:38,280 Speaker 1: of saying, you know, um, he would kind of hinting 480 00:25:38,560 --> 00:25:42,080 Speaker 1: that the Bank Anglands has got a bit uh politicized 481 00:25:42,160 --> 00:25:44,840 Speaker 1: really and and of course you know, can you would 482 00:25:44,840 --> 00:25:46,720 Speaker 1: say that they're not forecast you know, in fact, last 483 00:25:46,720 --> 00:25:48,440 Speaker 1: week he was sort of calling forecasts the F word. 484 00:25:48,480 --> 00:25:51,080 Speaker 1: He's saying his aren't forecasts he's a scenarios, he's a 485 00:25:51,800 --> 00:25:56,080 Speaker 1: you know, possibility. And in fact, even this morning he 486 00:25:56,119 --> 00:25:58,199 Speaker 1: was sort of saying, it's not a this is not 487 00:25:58,240 --> 00:26:01,199 Speaker 1: a forecast, it's not very likely. Um. But he was 488 00:26:01,240 --> 00:26:02,840 Speaker 1: the cardly this morning was funny him and saying, you 489 00:26:02,840 --> 00:26:05,520 Speaker 1: know that the result of two years of work and 490 00:26:05,560 --> 00:26:09,359 Speaker 1: standing by them. I'm wondering if you could describe, in 491 00:26:09,400 --> 00:26:12,879 Speaker 1: your opinion or based on sort of listening to the 492 00:26:12,920 --> 00:26:17,080 Speaker 1: media and to the experts, why did Lord King decide 493 00:26:17,359 --> 00:26:23,920 Speaker 1: to write this now and not six months ago? Um. 494 00:26:23,960 --> 00:26:25,880 Speaker 1: I wish I knew the answer to that, But what 495 00:26:25,920 --> 00:26:27,520 Speaker 1: we have been I don't know the answer to that. 496 00:26:27,560 --> 00:26:31,120 Speaker 1: But what we have been seeing, um, recently is that 497 00:26:31,200 --> 00:26:37,880 Speaker 1: people who have um been reluctant to to speak out, 498 00:26:38,320 --> 00:26:41,840 Speaker 1: people who normally wouldn't speak out. As we're getting we're 499 00:26:41,840 --> 00:26:44,560 Speaker 1: now sort of a hundred odd days away from breakfit Day, 500 00:26:44,640 --> 00:26:48,200 Speaker 1: this historic event that will you know, change the course 501 00:26:48,240 --> 00:26:53,119 Speaker 1: of you know, the economy, diplomacy, politics for generations. That 502 00:26:53,200 --> 00:26:54,880 Speaker 1: people are sort of starting to come out and say, 503 00:26:54,920 --> 00:26:57,720 Speaker 1: you know, they've read the small print that deal. You 504 00:26:57,720 --> 00:27:00,159 Speaker 1: know that withdrawal deal took a lot of digesting. You know, 505 00:27:00,160 --> 00:27:02,960 Speaker 1: it's this massive document and you know, it took days 506 00:27:03,040 --> 00:27:05,480 Speaker 1: for people to actually realize the implications of the legal 507 00:27:05,520 --> 00:27:08,679 Speaker 1: implications of this UM. And now I think what's happening 508 00:27:08,720 --> 00:27:13,000 Speaker 1: is that people from you know, in you know, public 509 00:27:13,040 --> 00:27:15,239 Speaker 1: and semi public figures are coming out and saying, you know, 510 00:27:15,600 --> 00:27:18,040 Speaker 1: we've really got to stop this. And the real argument 511 00:27:18,119 --> 00:27:20,920 Speaker 1: for backing the deal, the backing the reason is deal 512 00:27:21,720 --> 00:27:23,119 Speaker 1: is the end. And this is the argument that the 513 00:27:23,160 --> 00:27:25,199 Speaker 1: business is coming out with is you know, they just 514 00:27:25,200 --> 00:27:27,920 Speaker 1: want continuously they want to ender the uncertainty and and 515 00:27:28,119 --> 00:27:30,280 Speaker 1: any of the sort of more if you subscribe the 516 00:27:30,280 --> 00:27:34,000 Speaker 1: surface of of the deal, you know, people are tending 517 00:27:34,040 --> 00:27:37,040 Speaker 1: to come out with arguments are more about how this 518 00:27:37,160 --> 00:27:39,359 Speaker 1: actually is is not a sarily good deal for the UK, 519 00:27:39,720 --> 00:27:43,119 Speaker 1: how it is quite lopsided um and how as I 520 00:27:43,200 --> 00:27:48,320 Speaker 1: say that sort of it risks trapping the UK into 521 00:27:48,359 --> 00:27:51,119 Speaker 1: the ease orbit without without a way out. Well, to 522 00:27:51,240 --> 00:27:54,320 Speaker 1: use a bed analogy, you know, you can break the glass, 523 00:27:54,359 --> 00:27:56,679 Speaker 1: but you can't hold back the water. It's great to 524 00:27:56,760 --> 00:28:00,760 Speaker 1: have these comments. At the very last minute. Mark Carney 525 00:28:00,760 --> 00:28:06,520 Speaker 1: has even kind of mocked Lord King, hasn't he. Well, 526 00:28:06,640 --> 00:28:10,160 Speaker 1: I mean, Carnie was sort of defending defending his work. 527 00:28:10,200 --> 00:28:13,359 Speaker 1: I think Carnie, you know, is no stranger to um 528 00:28:13,400 --> 00:28:17,280 Speaker 1: to criticism he you know, the pro Brexit camp here 529 00:28:17,400 --> 00:28:22,240 Speaker 1: has been very critical of Corney from from from the beginning. UM, 530 00:28:22,280 --> 00:28:23,560 Speaker 1: And I think you know, what we've seen is kind 531 00:28:23,560 --> 00:28:25,879 Speaker 1: of a continuation of that, really kind of justifying the 532 00:28:25,920 --> 00:28:31,160 Speaker 1: bank's work and and and it's independence. And one final question, 533 00:28:31,600 --> 00:28:34,119 Speaker 1: there's so much going on here, what will be the 534 00:28:34,280 --> 00:28:37,720 Speaker 1: kerry forward of Mervyn King's essay? Does it just float off? 535 00:28:38,320 --> 00:28:42,600 Speaker 1: Is an interesting essay from a bright, bright, experienced guy, 536 00:28:42,800 --> 00:28:45,600 Speaker 1: or does it get traction with the other media and 537 00:28:45,640 --> 00:28:51,520 Speaker 1: does a contraction within this heated debate in Britain. I mean, 538 00:28:51,560 --> 00:28:55,720 Speaker 1: I suppose, Um, what we're seeing is it's a question 539 00:28:55,720 --> 00:28:59,000 Speaker 1: of critical math, isn't it. More and more people come 540 00:28:59,000 --> 00:29:04,160 Speaker 1: out and and analyze this deal. And you know, just 541 00:29:04,320 --> 00:29:08,920 Speaker 1: now we've had Unite the Union, very big union has 542 00:29:08,960 --> 00:29:10,920 Speaker 1: just come out and said that they're also going to 543 00:29:10,960 --> 00:29:14,040 Speaker 1: be lobbying lawmakers to vote against this. And so I 544 00:29:14,080 --> 00:29:16,280 Speaker 1: think what's interesting is it's not the one voice, but 545 00:29:16,320 --> 00:29:19,760 Speaker 1: it's it's the voice is across the spectrum, across the 546 00:29:19,800 --> 00:29:23,080 Speaker 1: Brexit debate. UM. You remember Joe Johnson, you know we've 547 00:29:23,080 --> 00:29:26,240 Speaker 1: had you know, the Borishonson and Joe Johnson on both 548 00:29:26,240 --> 00:29:28,200 Speaker 1: sides of the debate are coming out against this deal 549 00:29:28,200 --> 00:29:33,200 Speaker 1: and think that's what's interesting is that across a cross discipline, um, 550 00:29:33,240 --> 00:29:35,840 Speaker 1: you know, you're seeing people saying this is actually a 551 00:29:35,880 --> 00:29:38,320 Speaker 1: really bad deal. It's been wonderful. Thank you so much, 552 00:29:38,360 --> 00:29:42,840 Speaker 1: Emma ros Thomas offer for London's of Courts and are 553 00:29:42,880 --> 00:29:45,600 Speaker 1: really doing all of our Brexit coverage and organizing that 554 00:29:45,760 --> 00:29:53,120 Speaker 1: for us. Thanks for listening to the Bloomberg Surveillance podcast. 555 00:29:53,480 --> 00:29:58,400 Speaker 1: Subscribe and listen to interviews on Apple podcast, SoundCloud, or 556 00:29:58,560 --> 00:30:02,320 Speaker 1: whichever podcast lat for him you prefer. I'm on Twitter 557 00:30:02,400 --> 00:30:05,880 Speaker 1: at Tom Keane before the podcast. You can always catch 558 00:30:05,960 --> 00:30:08,400 Speaker 1: us worldwide. I'm Bloomberg Radio.