Speaker 1: Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Leie. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg Let's
Speaker 1: Talk About Trade Show. We investors struggling to work out
Speaker 1: just what was agreed in Argentina. Larry Cutolo called them
Speaker 1: commitments that both sides would presumably implement. There was also
Speaker 1: confusion over when the ninety day tariff truce would begin,
Speaker 1: with Cutlos saying January one, which the White House later
Speaker 1: corrected to December one. China has remained largely silent in
Speaker 1: Shepherds and Joint US now Pantheon macro Economics chief Economists,
Speaker 1: So ian just what was agreed? Well, nothing very substantive.
Speaker 1: The the ninety day delayed to the implantation of the
Speaker 1: tariffs was apparently agreed, although that didn't appear in the
Speaker 1: Chinese statement. Uh, and nothing else. An agreement to talk
Speaker 1: h and an agreement to pursue a more sustainable trading relationship.
Speaker 1: But ninety days is nothing like enough. I suspect to
Speaker 1: draw up a fundamental change in China's trading relationship with
Speaker 1: the US. So I guess what we're now hoping for,
Speaker 1: is it in ninety days time or preferably before that
Speaker 1: the can will be kicked a bit further down the
Speaker 1: road and will continue to talk uh, and we won't
Speaker 1: ultimately see the imposition of those tariffs. So markets like
Speaker 1: that bit. But then the closer you look at it,
Speaker 1: the less of real substance that there is. We're getting
Speaker 1: this slow drip feed of more information. There was no
Speaker 1: mention of autos on the statement released by the United
Speaker 1: States or the statement released by China. Then the President
Speaker 1: tweeted about it, and everyone's scrambling to work out what
Speaker 1: the agreement is exactly. Currently the terrorists for it's going
Speaker 1: to be fifteen for the rest of the world. Are
Speaker 1: they talking about coming down to the rest of the
Speaker 1: world or coming down to zero? Well, we don't know
Speaker 1: because China hasn't said so. Jan Ping and his economic
Speaker 1: entourage are still traveling and the silence is kind of deafening.
Speaker 1: So presumably we'll hear something more definitive in due course,
Speaker 1: but right now we're kind of scrambling now from from
Speaker 1: a macro perspective, I think what markets really wanted to
Speaker 1: hear was simply that the tariffs wouldn't be imposed January one,
Speaker 1: which was the original plan. So we're happy about that,
Speaker 1: and from a macro perspective, everything else is kind of detail.
Speaker 1: Though for individual sectors and for autos in particular, that
Speaker 1: potential shift from forty down to fifteen possibly would be
Speaker 1: an enormously big deal, but right now there isn't There
Speaker 1: is no hard information on this. And let's tig into
Speaker 1: your base case for where growth will be in just
Speaker 1: looking at the Bloomberg e CFC, the function on the
Speaker 1: Bloomberg terminal gives me a very quick snapshot of the
Speaker 1: median estimate of Wall Street for growth projections forecast two
Speaker 1: point six percent. We roll over to one point nine
Speaker 1: percent into twenty. Are you in and around those kind
Speaker 1: of figures? Two and a half I think is reasonable,
Speaker 1: But it's it's a year of two halves because I
Speaker 1: think in the second half it will be a great
Speaker 1: deal slower, and so I'm not with the market for twenty.
Speaker 1: I think twenty likely will be quite weak. I wouldn't
Speaker 1: be surprised to see a mild recession. I stressed mild
Speaker 1: in but at this point that is very contingent on
Speaker 1: the trade war not flaring up again and certainly not
Speaker 1: to the point where we end at tariffs are on
Speaker 1: the two billion currently tariff to ten percent, and certainly
Speaker 1: not any tariffs on consumer goods, which is another two
Speaker 1: seventy billion. So this is very much a kind of
Speaker 1: a binary position here that if we do go down
Speaker 1: the rabbit hole on tariffs and then the growth outlook
Speaker 1: will deteriorate in a heartbeat, and that two and a
Speaker 1: half number for next year will become extremely difficult to
Speaker 1: achieve and it will be a real mess. There is
Speaker 1: always something to worry about. I and the latest worry
Speaker 1: of the last twenty four hours once again worries about
Speaker 1: the yield curve resurfacing two year yields, three year yields
Speaker 1: trading slightly above where the five year yielded just a
Speaker 1: little bit of curve in version for the first a
Speaker 1: long time. Yeah, no, it is. It is the first
Speaker 1: time in a long time. I think that to me,
Speaker 1: markets have got shall we say, a little bit ahead
Speaker 1: of themselves on this disinflation story. You know, I don't
Speaker 1: buy the idea that we're heading into a materially lower
Speaker 1: inflation environment in the US because I think the labor
Speaker 1: market is so tight that the wage growth, which really
Speaker 1: is the big driver, is much more likely to head
Speaker 1: north and south for the foreseeable future. I think people
Speaker 1: are putting too much emphasis on the impact of the
Speaker 1: stronger dollar, which, yeah, it pulls down the price of
Speaker 1: imported everything, but most of the CPI is not imported goods.
Speaker 1: It's services. It's about wages. And the housing thing as well,
Speaker 1: which I think has really got a lot of attention,
Speaker 1: the idea of the housing markets rolling over, and it isn't.
Speaker 1: It's softening, it's not rolling. Well. What's interesting about this
Speaker 1: is the dollar has been weaker in the last two sessions,
Speaker 1: crude has been firmer in the last two sessions, yet
Speaker 1: the long end of the treasury curve is bid. I
Speaker 1: see that again this morning. Yeah, because you know, we
Speaker 1: need to see the impact of the of the dollar,
Speaker 1: and I couple of days of a dollar weakening doesn't
Speaker 1: doesn't reverse the seven percent appreciation in the trade way
Speaker 1: to dollar over the last year, and that's really what's
Speaker 1: been pushing down goods prices. The yield that we have.
Speaker 1: What does it signal to our listeners. I think the
Speaker 1: base feel of all our listeners would be it just
Speaker 1: means economic slowdown. Is there another signal there? Well? Economic
Speaker 1: slowdown all lower inflation. And at the moment, I think
Speaker 1: the market is playing with both of those stories. I
Speaker 1: think they might be premature on them both, because you know,
Speaker 1: global growth certainly has lost a bit of its edge.
Speaker 1: How much of that is due to tariffs and how
Speaker 1: much of it is due to China's trend slowdown is
Speaker 1: another question. But the US is strong. Growth here is strong.
Speaker 1: The labor market here is super tight. We have a
Speaker 1: three point seven unemployment rate and we've got zero real
Speaker 1: short have wage increases there are above three percent now
Speaker 1: a couple get more med and than anything else. Yeah,
Speaker 1: you know, when guys like you say wages are people
Speaker 1: are like, are you out of your mind? Way? Wages
Speaker 1: are up. They're not up as much as as a
Speaker 1: lot of people would like, that's for sure. But especially
Speaker 1: if you're in a in a in a part of
Speaker 1: the country where the lab market is even tighter than average,
Speaker 1: and there are some places but unemployments well below three percent,
Speaker 1: wage growth in those places is faster. If you're in
Speaker 1: a very tight sector like transportation trucking. You know, there's
Speaker 1: some big wage games, but not everywhere. Not everyone. Email
Speaker 1: just came in from John unless your city, no one cares.
Speaker 1: Talked to Ian about the sale of Newcastle United. Why
Speaker 1: is it so hard to sell a Premier League football team?
Speaker 1: We want to Sally because the guy, the guy who
Speaker 1: owns it, wants an insane price for it. That's that's
Speaker 1: the problem. Rumors that you were bidding, but you know,
Speaker 1: I mean, I'd love to, but I'm you know, a
Speaker 1: few hundred million short. Is there usually want to Sally?
Speaker 1: And if if I went in with former million in
Speaker 1: a black suitcase this afternoon, he would take it. But
Speaker 1: but known in their right mind and to pay that.
Speaker 1: Let's translate this for the US audience. Is Newcast United
Speaker 1: like the Kansas City Royals. And I say that with
Speaker 1: great respect for the memory of George Brett. I mean,
Speaker 1: is it a smaller market team or it can't compete
Speaker 1: with the you know, one of the big Manchester United
Speaker 1: and the others. It's all about the ownership because the
Speaker 1: ownership then, you know, if you're owned, as Manchester City
Speaker 1: is effectively by the state of ABU Dabbi, you have
Speaker 1: a limitless amount of money to spend. Newcastles owned by
Speaker 1: so Mike Ashley, who runs Newcastle United is a big
Speaker 1: sort of main street retail player as well. He's not
Speaker 1: very popular in that sense either. Tom used to be
Speaker 1: owned by a gentleman called Freddie Shepherd. These were like
Speaker 1: the glory days of Newcastle United in the nineties. Newcastle
Speaker 1: would great transfer records. They would be that good. They
Speaker 1: could compete for the best talent on the planet. Things
Speaker 1: have changed, Things have changed. We've had a negative net
Speaker 1: spend last year. Well are they going to be is
Speaker 1: it the right word relegated? They probably not, because fortunately
Speaker 1: there are three teams worse than us, which is quite
Speaker 1: an achievement. But I think right now that it is
Speaker 1: the case. Well, we measure our teams by economists. I mean,
Speaker 1: I see Blanche Flowers one notch below Shepherdson, Yeah, am
Speaker 1: I right on there? And west Ham Steve Major's team
Speaker 1: beat right now at the weekend. Yeah yeah, but Major
Speaker 1: got the yield call, right, So that's that's that's that's right,
Speaker 1: That's right. Okay, we'll leave it. We can have an
Speaker 1: economist ranking of the Premier League type we should on
Speaker 1: the back of all the teams in the Economists is identified.
Speaker 1: Who's identified with Crystal Palace. Oh, I don't know, although
Speaker 1: we did have a listener right in about Crystal Palace recently.
Speaker 1: So there is a Crystal Michael Crystal Palace, Michael Barr.
Speaker 1: Would that be good? Well? I used to love the
Speaker 1: Pistons when they played at the Palace, but that's another
Speaker 1: that's another story completely. I and Shepherdson thank you so much,
Speaker 1: particularly for your comments for the morning on the protests
Speaker 1: in the press conference in France. Widely knowing that John
Speaker 1: Ferre and I don't get along, but contrary to the belief,
Speaker 1: we actually almost listen to each other. We rarely talk,
Speaker 1: but we listened to each other in the break and
Speaker 1: Iro Jersey with us from Bloomberg Intelligence, just wonderful on
Speaker 1: bonds and this is the Bond interview of the day.
Speaker 1: I was thunderstruck by something that John Farroll said, which
Speaker 1: is it's not where the yield curve is or all
Speaker 1: these dynamics, it's the way we're getting there. Just seems
Speaker 1: so odd right now? How odd is it? So? Well,
Speaker 1: so the headlines aren't basically keeping up with the with
Speaker 1: what the markets doing. The market is someone saying by
Speaker 1: a bond yield, lower price higher correct, and and you
Speaker 1: wouldn't expect that given what's happened with equities, given you know,
Speaker 1: the um some of the some of the headlines that
Speaker 1: came out over the weekend with you know, maybe an
Speaker 1: easing of trade tensions, even though that that seems to
Speaker 1: be um, you know, walking back a little bit um,
Speaker 1: but you would have expected at least I would have
Speaker 1: expected some steepening and probably bear steepening. So basically ten
Speaker 1: year yields, thirty year yields selling off. But instead we're
Speaker 1: getting exactly the opposite. So why is that, Well, that's
Speaker 1: the market telling you that they're skeptical that economy and
Speaker 1: the economy and inflation are likely to be significantly higher
Speaker 1: in the future than they are now. But I mean,
Speaker 1: these moves are not massive, right, We're talking about a
Speaker 1: few basis points. It's not like this is a major
Speaker 1: I'm gonna do my stand fisher here on a percentage
Speaker 1: change basis. These are big deals. We've gone from twenty
Speaker 1: two to thirteen beeps on the two stents spread. That's
Speaker 1: not massive. So if you think about it from a
Speaker 1: from a total return perspective depending on how you you
Speaker 1: size your risk. If you did that in say, you know,
Speaker 1: buying fifty million of one and and um and ten
Speaker 1: million of another, then um, you wind up with you know,
Speaker 1: reasonable returns. But it's not it's not going to make
Speaker 1: your year, right, that's not what's something that's going to
Speaker 1: make your year. But you know, if you had that
Speaker 1: trade right, you did well. Obviously I don't know how
Speaker 1: many people were, which I think might be one of
Speaker 1: the reasons that this is a ring that people were
Speaker 1: in steep Nurse. The only thing that made my year
Speaker 1: was when John Ferrell canceled his two egg vocation. That's
Speaker 1: what the British do. Do you know? It's sound one
Speaker 1: year anniversary today? Did you know? That? Is it? And
Speaker 1: I didn't get you guys a car one year on
Speaker 1: Bloomberg Surveillance Radio together. Yeah, O cake. Nothing. I thought
Speaker 1: they'd bringing us a cake, but nothing. I didn't get anything.
Speaker 1: Don't I get a reward for this for last than
Speaker 1: a year? The wise really interesting. I just want to
Speaker 1: have a look at what we're now sort of signaling
Speaker 1: for people, because I think for a lot of equity
Speaker 1: investors they've been conditioned to worry about this a great deal.
Speaker 1: Inversion from front to belly, So from sort of the
Speaker 1: two year space into the five year is actually quite
Speaker 1: normal at this kind of time. It's quite normal for
Speaker 1: a lot of people to be thinking about. Just to
Speaker 1: help them get their heads around it, that's what you
Speaker 1: expect to happen first, correct, and then several years later
Speaker 1: is really when you start to see the economy rollover right,
Speaker 1: and more importantly, I think, is when you wind up
Speaker 1: getting the whole curve in version. Right. So when twos
Speaker 1: to tend to the two years to the tenure inverts,
Speaker 1: that's kind of been the signal in the past. It said, um,
Speaker 1: you know, eighteen months later you expect a recession, um.
Speaker 1: And but that only happens in this environment if the
Speaker 1: Fed goes too far. So right now we're pricing for
Speaker 1: a December hike, We're pricing for one hike in two
Speaker 1: thousand nineteen. Unless the Fed goes more than that, then
Speaker 1: inverting that whole curve is will probably be avoided. That
Speaker 1: being said, and as Tom noted, you know, the curve
Speaker 1: has flattened quite a lot the last couple of days,
Speaker 1: and that's really something that I think some people are
Speaker 1: going to be concerned with in the long term. But
Speaker 1: it's also saying I think at some level that we
Speaker 1: think that the FED is going to stop, and we
Speaker 1: do think that at some point in the next ten
Speaker 1: years we're going to see your recess. So this rise
Speaker 1: is a big question for a lot of people. I
Speaker 1: know some people will be trying to gain this and
Speaker 1: it's incredibly difficult to do. We started to think about
Speaker 1: when the next right cup comes, and I'm not talking
Speaker 1: about in the next twelve months, but when you start
Speaker 1: to think out where the next right cup comes, you're
Speaker 1: looking across the treasury curve to work out where in
Speaker 1: the curve looks cheap relative to the idea that say,
Speaker 1: the five year ultimately becomes where the Fed funds right
Speaker 1: is because that maturity will be what you want to
Speaker 1: buy when they sort of cut right. So why are
Speaker 1: we thinking on the curve the think looks cheap where
Speaker 1: really in several years time is going to be most
Speaker 1: lightly impacted by right cut. So when you look at
Speaker 1: the the overnight index swap market, which is based on
Speaker 1: where the FED funds rate is expected to be at
Speaker 1: some period of time, we're not pricing that right now
Speaker 1: UM basically at all um so, but we're basically saying
Speaker 1: in two thousand nineteen, the market saying in two thousand nineteen,
Speaker 1: the Fed's gonna stop, We're gonna stay there four years, right,
Speaker 1: And that's one reason why you can have this flat
Speaker 1: curve from two year to five year UM. And you
Speaker 1: know there is some chance maybe in twenty one that
Speaker 1: they'll cut, but the market tends not the price for
Speaker 1: that until there's a little bit more visibility into UM
Speaker 1: into things that far out. The market tends to be
Speaker 1: pretty good at the next two years, not so good
Speaker 1: when you get significant further all these generations away from
Speaker 1: full faith and credit. The you know, his corporate act
Speaker 1: in the same way yields into so corporate well yields
Speaker 1: are yields and corporates have come down a little bit,
Speaker 1: but that's mainly because of the rate move, it's not
Speaker 1: because of spreads. So corporate spreads haven't really moved a
Speaker 1: whole heck of a lot recently. What are find portfolio
Speaker 1: is doing right now? You know, what's a typical total
Speaker 1: return fund manager doing besides a yeah, so you know
Speaker 1: a lot of people I think had had pretty poor
Speaker 1: years just because of what's happened, you know in uh
Speaker 1: UM in the market with significant sell off. So earlier
Speaker 1: in the year, a total return for a lot of
Speaker 1: total return managers did very well because they were underweight
Speaker 1: duration there or might might have been short interest rates.
Speaker 1: And when interest rates went up they did very well.
Speaker 1: But they kept that view instead of instead of reversing
Speaker 1: it um. But you look at you look at things
Speaker 1: like speculative um positioning in treasury futures, and and everyone
Speaker 1: was so massively short. In fact, just about six weeks
Speaker 1: ago they hit the shortest ever. Now they've cut that
Speaker 1: short by almost half. Don't be a stranger. This was great.
Speaker 1: This will be out on podcast Ira Jersey with your
Speaker 1: bond briefing for the day. This is just great for
Speaker 1: Global Wall Street. John, this is great. Kevin Book writes
Speaker 1: in English on oil at clear View Energy and he
Speaker 1: calls it green span on the Danube. That green span
Speaker 1: on the Danube. What we're gonna see out of Vienna
Speaker 1: and a Marie Horden with that great Saudi Arabian interview
Speaker 1: earlier today, we would not be surprised to find a
Speaker 1: brain twisting, circumlocutive jumble of word jazz from the clarinet
Speaker 1: is similar to some of the more obtrue statements that
Speaker 1: former FED Chairman Alan Greenspan issued during his uh A tenure. Kevin,
Speaker 1: that's a great way to put it within the verbi edge.
Speaker 1: What are we gonna look for from the cartel? Good
Speaker 1: morning time. I think the number is what we're looking for,
Speaker 1: and the number that won't inflame President Trump is why
Speaker 1: it comes in code one point four million. Is that
Speaker 1: I think in a pretty consensus expectations for what it'll
Speaker 1: take to balance the market. It helps to have Canada
Speaker 1: pulling oil off the market itself. It helps to have
Speaker 1: a slightly tighter Iran supply picture showing up in the numbers.
Speaker 1: But at one point for is what we're looking for,
Speaker 1: a one point four coordinated cut, Kevin. To be clear here,
Speaker 1: do you think that press release could be for an
Speaker 1: audience of one? Well, it's never just for an audience
Speaker 1: of one, but I think it's going to be worded
Speaker 1: with a particular wariness for that one. That's fascinating to
Speaker 1: me that the President has this must impact on opaque,
Speaker 1: the cartel, not just the Saudias. How will the other
Speaker 1: individual groups, countries, nations respond? To the pressure the Saudias
Speaker 1: arunta to do this. As you know, it's never easy, uh.
Speaker 1: There's there's always big contributions from the kingdom uh, and
Speaker 1: then pennies from some of the others. In this particular case,
Speaker 1: it's it's also a question of persuading Russia to stay
Speaker 1: in the game. For for Russia, right now, this is
Speaker 1: still looking like good economic self interest. But as you
Speaker 1: start to see the see the peeling a way of
Speaker 1: cutter and start to ask whether or not this is
Speaker 1: really going to stay in Russia's long term self in
Speaker 1: First it has to do with whether or not there's
Speaker 1: a new regional realignment taking place, and whether Russia's other
Speaker 1: economic goals including selling nuclear power plants and natural gas
Speaker 1: and other aspects of their their portfolio to Turkey and
Speaker 1: other partners in the region, start to predominate. For now,
Speaker 1: it looks like coordination high five goes a long way
Speaker 1: towards setting expectation, So Kevin and high five. But it's
Speaker 1: easy to high five when you boast boosting output at
Speaker 1: record amounts. I mean, we've got record production in Russia,
Speaker 1: record production and Saudi arab but what would you consider
Speaker 1: a material cut? Going back to the levels of before
Speaker 1: the summer, going to the levels of ELIO this year.
Speaker 1: What would a real cut be, thorough peck Well, the
Speaker 1: real concern is that they might undercut relative to where
Speaker 1: demand might take us. We have a fairly barished demand outlook,
Speaker 1: just thinking about the frictional impacts of the nascent trade war.
Speaker 1: It's hard to prove. We can't see the investments that
Speaker 1: don't happen, you can't see the demand that didn't materialize,
Speaker 1: and downward convisions are the stuff of oil analysis, right
Speaker 1: but still sorry, go on, no, no, it's fine, I'm listening.
Speaker 1: I'm I'm loving it, Kevin book. But the the issue Kevin,
Speaker 1: for me is six weeks ago we were talking about
Speaker 1: a bond market that was going to go to three
Speaker 1: and a half per cent tenure. Eight weeks ago, you
Speaker 1: tell me exactly oil was going to a hundred dollars
Speaker 1: of barrel. These these fancy people show up in Vienna,
Speaker 1: and am I right that they're showing up within a
Speaker 1: cacophony of instability? I mean, do they have any clue
Speaker 1: what the underlying microeconomics are. I think that there's nobody,
Speaker 1: nobody is particularly comfortable with the the instability of an
Speaker 1: unsynchronized global growth picture. Uh, the idea of oil war
Speaker 1: roaring ahead as we all go straight into the you know,
Speaker 1: the three and a half four percent sugar juice vp
Speaker 1: HI of the United States. That's over right. So we
Speaker 1: have such an incredibly strong GDP linkage in the non
Speaker 1: O E C d H. In addition to that, there's
Speaker 1: growing price sensitivity and some of those non consumers recruit.
Speaker 1: So when you start to see China respond to high prices,
Speaker 1: when you see currency adjusted acquisition costs tamping down demand,
Speaker 1: when you see effective trade stagnation, if not outright war
Speaker 1: starting to crimp investment, those are the warning signs that
Speaker 1: made me think, gosh, you know, maybe maybe things are
Speaker 1: a little weaker out there for well than we thought.
Speaker 1: What happens with the U s off the Bank of
Speaker 1: the outpect decision this week, Well, the brakes are off
Speaker 1: a lot worse than the accelerator. The problem with shale
Speaker 1: is that the latency takes a while. The on the downside,
Speaker 1: we saw we saw what happened in it was you know,
Speaker 1: six to nine months in some formations for things really
Speaker 1: slowed down. And how quickly can zip back to answer
Speaker 1: the call from demand when it resurfaces. So I think
Speaker 1: you probably are in some ways blessed by the constraints
Speaker 1: coming out of some of the most prolific producing areas
Speaker 1: like Permian. At this point it's not that easy to
Speaker 1: get the additional group to market. Uh. That makes some
Speaker 1: of the costs an issue. But once those wells start,
Speaker 1: people are going to run those wells. I can interview
Speaker 1: US production. Just to be clear, though the rick count
Speaker 1: has never recovered from the collapse, has it? Is this
Speaker 1: a region regions that are doing more with less? Absolutely
Speaker 1: it didn't need to recover because they're getting more out
Speaker 1: of the ground with fewer rigs. Doing more with less
Speaker 1: is terrific. Higher efficiency wells are terrific. Remember those wells
Speaker 1: run right, We don't We don't shut stuff off. Spare
Speaker 1: capacity isn't for for US producers. What is the likelihood
Speaker 1: or probable of the I should say, of revisiting of
Speaker 1: barrel I have not asked that question folks since the
Speaker 1: hundred You know the dash to a hundred dollars a barrel?
Speaker 1: But who says words stasis here? I mean review how
Speaker 1: we got the thirty dollars a barrel and could it
Speaker 1: happen right now? Well, yes, of course. The will market
Speaker 1: has a wide range, and it's demonstrated. I mean it's
Speaker 1: it's operatic in its range, all the way from the
Speaker 1: highest to the loads. A thrilling show. But look, the
Speaker 1: reality is that at this point we still have some
Speaker 1: fairly robust consumption going on in the world. Uh, it
Speaker 1: isn't obvious that you're all the way down to bleakness.
Speaker 1: You also had the Kingdom unwilling to take action and
Speaker 1: to muscle up and say all right, let's cut. They
Speaker 1: thought they would flood, and flood they did. As production
Speaker 1: continued to flow out of out of the US producers,
Speaker 1: the Kingdom didn't stop. Now they've taken a more activist role. Kevin,
Speaker 1: I want to hit the final point that we haven't
Speaker 1: touched on just yet. I had no idea that Canada
Speaker 1: could join the cutting crew. How is that possible that
Speaker 1: they even have the ability to do this, to tell
Speaker 1: a region effectively to shut it down a little bit. Well,
Speaker 1: there's there's a lot to be said for what it
Speaker 1: what it means to be Canadian and to be so
Speaker 1: heavily dependent in the Western Canada sedimentary base and on
Speaker 1: the fruits of production. Uh, these are the kinds of
Speaker 1: actions that are are dire. But when you saw differentials
Speaker 1: to w T I, you know, forty up for West
Speaker 1: Canada select, I think that speaks to to why there's
Speaker 1: there's a sense of intervention. Technically, the Canadian people are
Speaker 1: owners stakeholders to the oil production in their country. There's
Speaker 1: there's tax flows, there's other secondary revenue streams. It's the
Speaker 1: kind of thing that it definitely it doesn't feel quite
Speaker 1: like capitalism, but then again, you know, not much does sometimes.
Speaker 1: Kevin has been a huge valuable Kevin book, Thank you
Speaker 1: so much, with clear view energy, with a briefing on
Speaker 1: the vicissitudes. As they say, I'm we are thrilled to
Speaker 1: end strong hero on Bloomberg Surveillance today with m Ross
Speaker 1: Thomas driving forward all of our Brexit coverage, Emma, I
Speaker 1: was thunderstruck by the scathing critique of the former Governor
Speaker 1: of the Bank of England against Prime Minister May. The
Speaker 1: headline of the Bloomberg opinion piece May's Brexit deal is
Speaker 1: a betrayal of Britain. Did you see this coming from
Speaker 1: Irvin King? The criticism that is already sort of out
Speaker 1: there on both sides of it are Brexit debate, which
Speaker 1: is that this deal not only is it the worst
Speaker 1: of both worlds, but that it's sort of somehow trapped
Speaker 1: the UK within the euse orbit um and that really know,
Speaker 1: it's all from the very beginning. This is about the
Speaker 1: Irish backstop and you know the problem of how to
Speaker 1: deal with the Irish border, and that is what we're
Speaker 1: still fighting about. And even you though we had in
Speaker 1: Parliament yesterday, we had Olie Robbins who negotiated this thing,
Speaker 1: and even he was there saying, yeah, the backstops uncomfortable.
Speaker 1: You know, if we go if we end up going
Speaker 1: into this, it's not great. And you know, that really
Speaker 1: is why Thereason is on course to lose the vote
Speaker 1: according to all indications. You know that she's going to
Speaker 1: lose the vote next week because you know, the negotiated
Speaker 1: something that a lot of people on both sides and
Speaker 1: seeing as a trap. Buried in the heat of this
Speaker 1: essay is a single paragraph but a citing Paul Krugman,
Speaker 1: the Nobel Laureate, that the analysis of the Bank of
Speaker 1: England is correct in that these are long term effects.
Speaker 1: The Brexiteers would say these are one off effects that
Speaker 1: the United Kingdom can recover from. Discuss that debate right
Speaker 1: now in the United Kingdom is there a permanence to
Speaker 1: Brexit effects? Right? So I suppose the debate here very
Speaker 1: much is about um whether forecasts are are worth anything.
Speaker 1: You know, we had projects here with with with the
Speaker 1: referend campaign in twenty sixteen, the Bank of England came out,
Speaker 1: everyone came out and said that, you know, vote UM
Speaker 1: to leave would have disasters consequences for the economy that
Speaker 1: didn't play out at least immediately, partly of course, because
Speaker 1: Breast hasn't actually happened yet. And so really the debate
Speaker 1: here is about how reliable their talks are and also
Speaker 1: about the you know, the Bank of England weighing into
Speaker 1: what is essentially a political debate. And I think that's
Speaker 1: what was interesting about the Mermen king comments is sort
Speaker 1: of saying, you know, um, he would kind of hinting
Speaker 1: that the Bank Anglands has got a bit uh politicized
Speaker 1: really and and of course you know, can you would
Speaker 1: say that they're not forecast you know, in fact, last
Speaker 1: week he was sort of calling forecasts the F word.
Speaker 1: He's saying his aren't forecasts he's a scenarios, he's a
Speaker 1: you know, possibility. And in fact, even this morning he
Speaker 1: was sort of saying, it's not a this is not
Speaker 1: a forecast, it's not very likely. Um. But he was
Speaker 1: the cardly this morning was funny him and saying, you
Speaker 1: know that the result of two years of work and
Speaker 1: standing by them. I'm wondering if you could describe, in
Speaker 1: your opinion or based on sort of listening to the
Speaker 1: media and to the experts, why did Lord King decide
Speaker 1: to write this now and not six months ago? Um.
Speaker 1: I wish I knew the answer to that, But what
Speaker 1: we have been I don't know the answer to that.
Speaker 1: But what we have been seeing, um, recently is that
Speaker 1: people who have um been reluctant to to speak out,
Speaker 1: people who normally wouldn't speak out. As we're getting we're
Speaker 1: now sort of a hundred odd days away from breakfit Day,
Speaker 1: this historic event that will you know, change the course
Speaker 1: of you know, the economy, diplomacy, politics for generations. That
Speaker 1: people are sort of starting to come out and say,
Speaker 1: you know, they've read the small print that deal. You
Speaker 1: know that withdrawal deal took a lot of digesting. You know,
Speaker 1: it's this massive document and you know, it took days
Speaker 1: for people to actually realize the implications of the legal
Speaker 1: implications of this UM. And now I think what's happening
Speaker 1: is that people from you know, in you know, public
Speaker 1: and semi public figures are coming out and saying, you know,
Speaker 1: we've really got to stop this. And the real argument
Speaker 1: for backing the deal, the backing the reason is deal
Speaker 1: is the end. And this is the argument that the
Speaker 1: business is coming out with is you know, they just
Speaker 1: want continuously they want to ender the uncertainty and and
Speaker 1: any of the sort of more if you subscribe the
Speaker 1: surface of of the deal, you know, people are tending
Speaker 1: to come out with arguments are more about how this
Speaker 1: actually is is not a sarily good deal for the UK,
Speaker 1: how it is quite lopsided um and how as I
Speaker 1: say that sort of it risks trapping the UK into
Speaker 1: the ease orbit without without a way out. Well, to
Speaker 1: use a bed analogy, you know, you can break the glass,
Speaker 1: but you can't hold back the water. It's great to
Speaker 1: have these comments. At the very last minute. Mark Carney
Speaker 1: has even kind of mocked Lord King, hasn't he. Well,
Speaker 1: I mean, Carnie was sort of defending defending his work.
Speaker 1: I think Carnie, you know, is no stranger to um
Speaker 1: to criticism he you know, the pro Brexit camp here
Speaker 1: has been very critical of Corney from from from the beginning. UM,
Speaker 1: And I think you know, what we've seen is kind
Speaker 1: of a continuation of that, really kind of justifying the
Speaker 1: bank's work and and and it's independence. And one final question,
Speaker 1: there's so much going on here, what will be the
Speaker 1: kerry forward of Mervyn King's essay? Does it just float off?
Speaker 1: Is an interesting essay from a bright, bright, experienced guy,
Speaker 1: or does it get traction with the other media and
Speaker 1: does a contraction within this heated debate in Britain. I mean,
Speaker 1: I suppose, Um, what we're seeing is it's a question
Speaker 1: of critical math, isn't it. More and more people come
Speaker 1: out and and analyze this deal. And you know, just
Speaker 1: now we've had Unite the Union, very big union has
Speaker 1: just come out and said that they're also going to
Speaker 1: be lobbying lawmakers to vote against this. And so I
Speaker 1: think what's interesting is it's not the one voice, but
Speaker 1: it's it's the voice is across the spectrum, across the
Speaker 1: Brexit debate. UM. You remember Joe Johnson, you know we've
Speaker 1: had you know, the Borishonson and Joe Johnson on both
Speaker 1: sides of the debate are coming out against this deal
Speaker 1: and think that's what's interesting is that across a cross discipline, um,
Speaker 1: you know, you're seeing people saying this is actually a
Speaker 1: really bad deal. It's been wonderful. Thank you so much,
Speaker 1: Emma ros Thomas offer for London's of Courts and are
Speaker 1: really doing all of our Brexit coverage and organizing that
Speaker 1: for us. Thanks for listening to the Bloomberg Surveillance podcast.
Speaker 1: Subscribe and listen to interviews on Apple podcast, SoundCloud, or
Speaker 1: whichever podcast lat for him you prefer. I'm on Twitter
Speaker 1: at Tom Keane before the podcast. You can always catch
Speaker 1: us worldwide. I'm Bloomberg Radio.