WEBVTT - Trump's Bi-Lat Trade Strategy Failed With China Deal 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penil Podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Wicks. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penil podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.000 at Bloomberg dot com. Well, the U S and China 0:00:21.079 --> 0:00:25.160 continue to make gradual progress on a Phase one trade deal, 0:00:25.160 --> 0:00:27.840 although we have not yet seen anything on paper. To 0:00:27.880 --> 0:00:30.560 get the latest, we welcome and Stevenson Yang, co founder 0:00:30.600 --> 0:00:33.800 and research director of JA Capitol Research, also a Bloomberg 0:00:33.800 --> 0:00:37.520 opinion contributor based in DC and Hong Kong, and thanks 0:00:37.560 --> 0:00:40.839 so much for joining us. What do you from your perspective, 0:00:40.840 --> 0:00:47.199 what is the latest on the China US trade negotiation? Hi? Um, 0:00:47.240 --> 0:00:51.559 you know, to be honest, it's nonsense. So we have 0:00:51.800 --> 0:00:55.080 we have almost two years of back and forth market 0:00:55.160 --> 0:00:59.040 gyrations and you know, high expectations in order to get 0:00:59.080 --> 0:01:01.720 back to the state of quo anti like, what's special 0:01:01.760 --> 0:01:05.399 about this? All right? Well, okay, this is an argument 0:01:05.440 --> 0:01:09.840 that people say we're going back to levels that said 0:01:09.880 --> 0:01:12.880 the forty billion dollars to fifty billion dollars of extra 0:01:13.400 --> 0:01:17.360 uh goods, and that China is supposed to import from 0:01:17.400 --> 0:01:19.760 the United States. There is a question of how feasible 0:01:19.840 --> 0:01:23.520 that is given the structure currently of their economy and 0:01:23.560 --> 0:01:26.960 the different trade routes. What's your sense of that. Do 0:01:27.000 --> 0:01:31.080 you think that that seems very doable at this point? Yeah, 0:01:31.160 --> 0:01:33.600 this reminds me of you know, for many years, the 0:01:34.040 --> 0:01:38.640 Chinese Trade Ministry has been has been running these um 0:01:38.760 --> 0:01:41.720 these buying missions to the US where they'll send a 0:01:41.720 --> 0:01:46.120 whole lot of you know, soe presidents on a delegation 0:01:46.240 --> 0:01:48.800 with the Ministry of Commerce and they'll say they'll sign 0:01:48.800 --> 0:01:50.880 all these agreements and China is going to buy all 0:01:50.960 --> 0:01:53.280 this stuff, and John's gonna invest all this money. It 0:01:53.360 --> 0:01:57.200 never actually happens, it's it's for the headline effects. So 0:01:57.600 --> 0:02:00.120 what China is going to do is they're going to 0:02:00.400 --> 0:02:05.120 kind of um slice away at at the commitments by uh, 0:02:05.160 --> 0:02:09.840 you know, re renaming Hong Kong imports as as mainland 0:02:09.880 --> 0:02:13.160 imports and then uh, you know, signing a deal that 0:02:13.240 --> 0:02:15.880 they don't actually implement, you know, stuff like that. So 0:02:16.280 --> 0:02:20.520 what's happened is that the all the structural demands for 0:02:20.520 --> 0:02:25.320 for Chinese economic change have just disappeared because the US 0:02:25.440 --> 0:02:28.360 realized that they're they're not realistic. In the US really 0:02:28.440 --> 0:02:30.520 has sort of, you know, caved in order to get 0:02:30.520 --> 0:02:33.679 a deal, and instead the US says, okay, just buy 0:02:33.760 --> 0:02:36.440 more stuff please, and China says, yeah, we might do that. 0:02:37.160 --> 0:02:39.519 So and does this call into question the value of 0:02:39.600 --> 0:02:42.800 kind of this bilateral type of negotiation as opposed to 0:02:43.400 --> 0:02:46.320 you know what probably was more the norm of a 0:02:46.400 --> 0:02:50.880 multilateral maybe the transpecific partnership. From your perspective, all the 0:02:50.960 --> 0:02:54.440 history that you have with China and China trade, what 0:02:54.480 --> 0:02:58.040 do you think is the best way to proceed with China? Yeah, yeah, Look, 0:02:58.080 --> 0:03:02.840 it's totally understandable why there's great frustration with China. But 0:03:02.840 --> 0:03:06.120 but the fact is that the real problem has been 0:03:06.240 --> 0:03:10.720 lack of use of the of the dispute resolution mechanisms 0:03:10.760 --> 0:03:13.880 that exist in the w t O, lack of accession 0:03:13.919 --> 0:03:16.400 to the t p P and so forth. There's a 0:03:16.440 --> 0:03:18.720 lot of stuff that we could be doing in demands 0:03:18.720 --> 0:03:21.120 we could be making of China that we have not made, 0:03:21.120 --> 0:03:23.360 and we've hobbled the w t O. And yes, I 0:03:23.440 --> 0:03:28.239 agree the bilateral mechanisms are just not very satisfactory going forward. 0:03:28.360 --> 0:03:30.880 What are you looking forward to determine whether the Phase 0:03:30.960 --> 0:03:34.280 one deal is moving ahead as expected in terms of 0:03:34.320 --> 0:03:38.000 Phase one A, Phase one B, Phase one C that 0:03:38.120 --> 0:03:43.560 actually effectuates the existing tariffs being rolled back. Well, it's 0:03:43.640 --> 0:03:46.800 it seems to me that the only real demand because 0:03:46.840 --> 0:03:49.840 all the concessions on on you know, stuff like intellectual 0:03:49.840 --> 0:03:54.160 property have already been baked into into Chinese um you know, 0:03:54.320 --> 0:03:58.080 new laws and resolutions and the currency thing kind of 0:03:58.560 --> 0:04:01.320 that was that became unimp written about ten years ago. 0:04:01.920 --> 0:04:06.160 Um So, so the only significant issue here is whether 0:04:06.240 --> 0:04:09.600 China will actually make the purchases that it says it will. 0:04:10.040 --> 0:04:13.760 And most of those purchases are focused on soybeans and 0:04:13.840 --> 0:04:19.479 corn ethanol, right so, and that's very important obviously to 0:04:19.560 --> 0:04:24.599 Trump because they're they're they're base constituencies that rely on 0:04:24.680 --> 0:04:27.760 selling those commodities. So it's kind it becomes a question 0:04:27.800 --> 0:04:30.760 of well, China, does China really want to boost the 0:04:30.800 --> 0:04:35.440 Trump chances of reelection? Um there have been signs that 0:04:35.560 --> 0:04:38.560 it did for a long time. Now it's not so clear. 0:04:39.200 --> 0:04:41.200 So as we look back on this process, or not 0:04:41.279 --> 0:04:43.200 even done the process yet, because yet We've not even 0:04:43.200 --> 0:04:45.360 seen anything on paper, but assume the Phase one deal 0:04:45.440 --> 0:04:48.479 turns out the way it's been reported. Looking back, well, 0:04:48.560 --> 0:04:50.800 this will this outcome, this Phase one deal will be 0:04:50.800 --> 0:04:55.520 worth two years of all this uncertainty in the global markets. Yeah, 0:04:55.680 --> 0:04:58.720 totally not did did there need to be a reset 0:04:58.960 --> 0:05:02.520 of the US China relationship, Absolutely, But I think that 0:05:02.640 --> 0:05:06.800 a lot of that reset is about uh no longer 0:05:07.600 --> 0:05:12.960 um capitulating to unreasonable Chinese you know, actually bullying over 0:05:13.080 --> 0:05:15.400 things like you know, the name that we called Taiwan 0:05:15.640 --> 0:05:19.440 and whether Leotill boy gets a Nobel Prize and stuff 0:05:19.480 --> 0:05:22.679 like that. Um, so we need to stop being cowed 0:05:22.720 --> 0:05:25.840 by that sort of thing. But this, you know, weaving 0:05:25.880 --> 0:05:28.640 back and forth on tariff levels is really just not 0:05:28.720 --> 0:05:31.720 a good thing for either economy. And Stevenson Yang thank 0:05:31.760 --> 0:05:34.120 you so much for being with us. And Stevenson Yang 0:05:34.240 --> 0:05:37.120 is co founder and research director at Jay Capital Research, 0:05:37.279 --> 0:05:54.320 as well as a Bloomberg opinion contributor. There are a 0:05:54.360 --> 0:05:56.960 number of ways to sort of size and scope the 0:05:57.000 --> 0:05:59.640 fang stocks, or as I call them earlier fanmag which 0:05:59.680 --> 0:06:06.080 is Facebook, Amazon, Netflix, Microsoft, Apple, and Google. Um well, 0:06:06.120 --> 0:06:08.520 I mean that's sort of the sort of guts of 0:06:08.560 --> 0:06:10.960 the of the tech sector. I think you just is 0:06:10.960 --> 0:06:14.719 that yours and I remember discussing it with some colleagues. 0:06:14.760 --> 0:06:17.280 I don't want to take full credit about this, but 0:06:17.720 --> 0:06:20.080 I think that it's important to to look at the 0:06:20.160 --> 0:06:23.919 performance of the fanmag socks aside from the rest of 0:06:23.920 --> 0:06:26.760 the SMP to understand the rally and understand going forward 0:06:26.800 --> 0:06:29.279 how big a bet you're making on big tech in 0:06:29.320 --> 0:06:31.839 the U S if you invest in the index. Nichols 0:06:31.920 --> 0:06:34.760 joining us here, co founder of Data Trek Research LLC 0:06:35.320 --> 0:06:37.680 uh here in our interactive broker studios, can you give 0:06:37.720 --> 0:06:40.920 us some some sense of how responsible this sector has 0:06:40.960 --> 0:06:45.600 been for the overall US equity performance. Yeah, it's been sizeable. Obviously. 0:06:45.640 --> 0:06:47.440 If you look at the past five years, you can 0:06:47.560 --> 0:06:49.960 have a point of single names like Amazon that hasn't 0:06:50.000 --> 0:06:52.520 done all this all that well this year, but over 0:06:52.520 --> 0:06:54.880 the last five years is something like seven percent of 0:06:54.880 --> 0:06:58.800 the entire SMPS return, even though it's obviously was coming 0:06:58.800 --> 0:07:02.039 from a small base. UH and XLK, the e t 0:07:02.160 --> 0:07:04.359 F that follows it is now up thirty plus percent 0:07:04.440 --> 0:07:07.240 for the year. If you look at sector waitings, it's 0:07:07.279 --> 0:07:10.920 even more impressive for tech. If you add in Google, Facebook, 0:07:10.920 --> 0:07:13.559 and Amazon that aren't in tech. You're talking about thirty 0:07:13.600 --> 0:07:16.400 two percent of the SMP, and that gives people pause. 0:07:16.440 --> 0:07:18.200 But I would point to two things. The first is 0:07:18.360 --> 0:07:21.320 there is no European or EFA tech sector to speak of. 0:07:21.400 --> 0:07:23.640 It's seven percent of EFA. So the waiting that you 0:07:23.680 --> 0:07:26.240 see in the SMP isn't just for the US economy. 0:07:26.440 --> 0:07:29.280 It's for US and Europe and Japan and parts of 0:07:29.320 --> 0:07:32.600 emerging market. So you're looking at a global franchise. And 0:07:32.640 --> 0:07:35.360 the second issue is, unlike a lot of other sectors, 0:07:35.360 --> 0:07:37.400 tech is not a stranded asset. If you think about 0:07:37.400 --> 0:07:39.840 the energy sector, which I think by most accounts is 0:07:39.920 --> 0:07:43.240 virgin on stranded asset territory, it's now smaller than Apple's 0:07:43.280 --> 0:07:45.560 market cap or Microsoft's market cap and the SP five 0:07:45.640 --> 0:07:47.840 hundred and so you have a combination of things. A. 0:07:48.000 --> 0:07:50.600 It's a growth sector, be it's not a stranded asset, 0:07:50.640 --> 0:07:53.280 and it probably will never be. So we talk about 0:07:53.440 --> 0:07:55.720 the fangs in tech, you know, really dominating the market. 0:07:55.720 --> 0:07:58.240 But that raises a concern of breath. When we think 0:07:58.280 --> 0:08:01.640 about the lack of breath of the market in this 0:08:01.800 --> 0:08:04.040 move up we've had, is that a real concern? Do 0:08:04.080 --> 0:08:08.280 you think to professional investors. It certainly is to professional investors, 0:08:08.800 --> 0:08:10.600 and certainly to our clients. We we get a lot 0:08:10.600 --> 0:08:12.679 of emails about this. The way we try to explain 0:08:12.720 --> 0:08:16.560 it is basically a permutation of what I just discussed is, Look, 0:08:16.640 --> 0:08:18.600 this is the sector that is growing. If you want 0:08:18.640 --> 0:08:20.520 to put if you had to lock your money up 0:08:20.560 --> 0:08:22.520 for ten years, would you either it be in tech 0:08:22.720 --> 0:08:26.000 or in any other sector of the SMP. Although there's 0:08:26.040 --> 0:08:29.200 a question of which tech, right, I mean, yes, some 0:08:29.280 --> 0:08:32.320 of these big giants, particularly Amazon has had an amazing 0:08:32.400 --> 0:08:35.880 run of it. Uh, Facebook certainly as well. The new 0:08:35.920 --> 0:08:38.600 tech might be different. It might be cybersecurity, it might 0:08:38.640 --> 0:08:41.040 be you know, cloud computing, and there will be a 0:08:41.040 --> 0:08:43.080 breakdown of the halves and the have nots within the 0:08:43.120 --> 0:08:47.120 tech sector. Netflix may be subsumed by another company based 0:08:47.160 --> 0:08:50.080 on the increasing competition and streaming. So how do you 0:08:50.120 --> 0:08:53.920 sort of understand the lasting quality of of of tech 0:08:54.040 --> 0:08:56.120 that's offered by these companies. Yeah, it's a great question. 0:08:56.120 --> 0:08:57.920 I mean I would say two points. The first is, 0:08:58.280 --> 0:09:00.360 if you think about the Big four, the Big five 0:09:00.440 --> 0:09:03.760 or your fanmag paradigm, they don't really compete with each 0:09:03.800 --> 0:09:06.920 other very much. That's very unlike the Chinese tech sector, 0:09:06.960 --> 0:09:09.800 where you have social media companies actively pushing into e 0:09:09.880 --> 0:09:13.079 commerce and e commerce companies building social networks. We don't 0:09:13.120 --> 0:09:15.120 have any of that in the States. The giants stick 0:09:15.160 --> 0:09:17.640 to themselves and that's kind of bad for competition in 0:09:17.679 --> 0:09:19.960 the US, but awesome for stock returns, and it probably 0:09:20.000 --> 0:09:22.520 won't change the second digit. You think about Amazon, what 0:09:22.640 --> 0:09:24.840 is Amazon right now? It's a cloud computing company. What 0:09:24.920 --> 0:09:26.319 does it want to be? It wants to be a 0:09:26.320 --> 0:09:29.880 cloud computing e tailor of AI solutions. That's what's really 0:09:29.920 --> 0:09:32.760 focused on. That's what recognition, facial recognition is about. That's 0:09:32.800 --> 0:09:34.679 what it wants to be. So if these companies do 0:09:34.720 --> 0:09:37.720 it right, they should also be the next leg. When 0:09:37.720 --> 0:09:40.959 you say that there isn't a lot of competition, there's 0:09:41.000 --> 0:09:43.280 these like alarm bells that go off in my head. 0:09:43.320 --> 0:09:45.520 Regulatory risk, regulatory risk. I mean, that's sort of the 0:09:45.520 --> 0:09:48.000 big concern here is that there aren't major competitors for 0:09:48.000 --> 0:09:51.199 any of these tech giants. How big of a potential 0:09:51.559 --> 0:09:54.760 headwind are regulatory concerns given the fact that so far 0:09:55.000 --> 0:09:56.840 it does not seem like there is much motion on that. 0:09:56.880 --> 0:09:59.040 While the talk not a lot of action, the most 0:09:59.080 --> 0:10:01.920 motion has been you know, California eight five, which is 0:10:01.960 --> 0:10:04.360 the Privacy rule which goes into effect on January one, 0:10:04.480 --> 0:10:06.400 and it is going to basically be the de facto 0:10:06.920 --> 0:10:09.520 US standard, but the Senate is still working on regulation. 0:10:10.000 --> 0:10:12.120 The bottom line to your answer your question is it 0:10:12.160 --> 0:10:14.880 really kind of depends on the elections, and it depends 0:10:14.880 --> 0:10:17.040 on how much traction the privacy aspects of this guy. 0:10:17.200 --> 0:10:19.439 That's the only thing that really people care about. Otherwise, 0:10:19.440 --> 0:10:22.000 people i think are pretty happy with the way technology 0:10:22.000 --> 0:10:25.680 interfaces with their life, except for privacy that needs to 0:10:25.720 --> 0:10:29.080 get resolved. But barring that, regulations should not be that 0:10:29.120 --> 0:10:32.000 big a deal, and from a shareholder productive hopefully they're 0:10:32.040 --> 0:10:35.600 not because the system works really well for shareholders right now. 0:10:35.840 --> 0:10:38.520 So as we think about coming off a very strong 0:10:39.320 --> 0:10:41.240 even if it would take a look at it from 0:10:41.240 --> 0:10:45.160 the peak of eighteen, still a real strong period, what 0:10:45.240 --> 0:10:48.079 do you think investors should be expecting for returns in 0:10:48.120 --> 0:10:51.960 twenty I've heard either boy load of mid single digits 0:10:51.960 --> 0:10:54.240 after the big run we've had, or I've had somebody. 0:10:54.360 --> 0:10:55.920 We've had some people come in and say, gee, the 0:10:56.000 --> 0:10:58.360 data kind of shows after a big double digit year, 0:10:58.520 --> 0:11:00.560 you're gonna get another double digit how do you how 0:11:00.559 --> 0:11:02.720 do you thinking about it? We're very data focus on 0:11:02.840 --> 0:11:05.560 We've done the same math and it's two observations. The 0:11:05.600 --> 0:11:08.040 first day is it's very uncommon for the SMP to 0:11:08.120 --> 0:11:11.400 hover around uh zero to five percent up or down 0:11:11.400 --> 0:11:13.320 in the following year. In any year, it's like a 0:11:13.360 --> 0:11:15.600 thirteen percent out of the last ninety one years, so 0:11:15.600 --> 0:11:17.959 it's not very common. So I wouldn't put a lot 0:11:17.960 --> 0:11:19.280 of money on the idea that you're not going to 0:11:19.360 --> 0:11:21.760 move very far. I do agree that you're probably going 0:11:21.800 --> 0:11:26.600 to get something slightly below long term average that is 0:11:26.720 --> 0:11:29.280 prefaced on some earnings growth, probably not as high as 0:11:29.320 --> 0:11:32.040 it's looking for a called three to five percent. And 0:11:32.160 --> 0:11:34.600 they said that, you know, is true to their sort 0:11:34.600 --> 0:11:37.640 of devish slanting word that they're not going to raise 0:11:37.679 --> 0:11:39.640 rates unless inflation gets really out of control and that 0:11:39.640 --> 0:11:42.240 will keep the ten year low and global growth is slow, 0:11:42.280 --> 0:11:44.160 so we shouldn't have much of a of a rally 0:11:44.160 --> 0:11:46.840 and yields. That's the recipe for a decent but not 0:11:46.960 --> 0:11:50.080 great year. What would you say to people who argued 0:11:50.240 --> 0:11:53.360 that big tech has just taken the growth from the 0:11:53.400 --> 0:11:58.200 other sectors, like say retail that's gotten kind of covered 0:11:58.280 --> 0:12:01.160 by Amazon's rise. I mean, is that sort of what's 0:12:01.160 --> 0:12:03.520 going on here. It's a piece of it, And I'd 0:12:03.520 --> 0:12:05.400 say it's more of a feature than a bug as 0:12:05.440 --> 0:12:08.840 far as as far as stocks go, because you have 0:12:09.360 --> 0:12:13.560 sectors that competed like retail and fairly inefficient forms and 0:12:13.600 --> 0:12:17.160 didn't really adapt in over time. Those should not receive 0:12:17.240 --> 0:12:19.679 capital because they're not innovating, and the companies that are 0:12:19.720 --> 0:12:22.680 do receive the capital and do receive the valuations that 0:12:22.679 --> 0:12:25.120 allow them to continue to grow. So I'd say it's 0:12:25.160 --> 0:12:27.880 a positive, but I get it, it's a painful positive 0:12:27.920 --> 0:12:30.520 if you happen to own retailers or other ship to sectors, 0:12:30.600 --> 0:12:33.400 or energy for that matter. Nicholas, thanks so much for 0:12:33.520 --> 0:12:36.000 joining us again. Nicholas is co founder of Data Trek 0:12:36.120 --> 0:12:38.400 Research based in New York City, joining us here in 0:12:38.400 --> 0:12:41.400 our Bloomberg Interactive Broker studio. Nick is also a Bloomberg 0:12:41.400 --> 0:12:44.400 Opinion Comments. We always love getting his thoughts on the market. Yeah, 0:12:44.440 --> 0:12:46.800 and this to me is such an interesting issue because 0:12:46.800 --> 0:12:48.720 people say, well, if you strip out the big tech 0:12:49.160 --> 0:12:52.559 from the SMP performance, it's really unimpressive or even a loss, 0:12:52.600 --> 0:12:55.120 and just say, you know, this is a potential problem 0:12:55.160 --> 0:12:57.960 for the market right, that there's weakness elsewhere, and is 0:12:58.000 --> 0:13:00.520 it a problem or is it, you know, one of 0:13:00.520 --> 0:13:02.880 the strengths of the market frankly, because if these companies 0:13:02.920 --> 0:13:05.800 continue to innovate, or if they continue to make as 0:13:05.880 --> 0:13:08.160 much money, then it will be something that can drive 0:13:08.200 --> 0:13:09.720 things forward. But it is sort of one of the 0:13:09.760 --> 0:13:28.839 existential questions facing the market. Today is a great day 0:13:28.840 --> 0:13:31.559 to get an informed perspective on what is going on 0:13:31.720 --> 0:13:34.400 with the pound. We see a big drop today, the biggest, 0:13:34.440 --> 0:13:37.960 I believe since July. As we hear, Boris Johnson raised 0:13:37.960 --> 0:13:41.040 the specter essentially of a hard Brexit if there isn't 0:13:41.080 --> 0:13:43.880 some sort of trade agreement created with the European Union. 0:13:43.960 --> 0:13:47.720 Allah what they did with Canada but in approximately six 0:13:47.800 --> 0:13:52.640 years fewer time joining us now. Marcus Ashworth, Bloomberg opinion columnist, 0:13:52.720 --> 0:13:56.600 And I'm wondering, Marcus, is your take here that markets 0:13:56.640 --> 0:14:01.400 are overreacting to something that Boris Johnson said with respect 0:14:01.520 --> 0:14:04.559 to basically raising the spectrum of hard Brexit again, or 0:14:04.600 --> 0:14:07.000 do you think that this is real uncertainty that the 0:14:07.080 --> 0:14:12.280 markets have been overly sanguine about in their post election enthusiasm. 0:14:12.520 --> 0:14:15.719 HIU high very much the former I mean, this is 0:14:15.760 --> 0:14:19.280 a gift for next year. I mean, it's very difficult 0:14:19.280 --> 0:14:24.400 to get on board ahead of in liquid markets before 0:14:24.400 --> 0:14:26.880 the new year. But let's face it, the most stable 0:14:26.960 --> 0:14:29.640 government in the Western world now we have a very 0:14:29.680 --> 0:14:35.240 clear majority under Boris Johnson, a very undervalued, very very 0:14:35.320 --> 0:14:39.960 undervalued stock market. It's it's dramatically on the performed europe US, etcetera. 0:14:40.520 --> 0:14:45.600 This year. Um. Yes, there's some wibbly wobbily about whether 0:14:45.600 --> 0:14:47.200 a deal is going to be done. I think no 0:14:47.360 --> 0:14:49.920 deal Brexit, which everyone in the media seems to go 0:14:50.000 --> 0:14:53.320 on and on and on about, has been clearly ruled 0:14:53.360 --> 0:14:58.480 out by the faculty, along with the rest of most 0:14:58.520 --> 0:15:01.280 of the mimeral media. But the reality is is that 0:15:01.360 --> 0:15:05.800 Boris dawn't got that sorted in very short order. He's 0:15:05.840 --> 0:15:10.400 just serving notice to both his party and indeed it's 0:15:10.400 --> 0:15:13.360 more of a domestic signal but equally to the European 0:15:13.400 --> 0:15:15.720 negotiators that let's get on with this. Stop coming up 0:15:15.760 --> 0:15:18.440 the excuses why it should be seven years or ten years. 0:15:18.640 --> 0:15:21.680 That shows you how rubbish the EU are negotiating things. 0:15:22.000 --> 0:15:25.160 Let's do something. We both stand at one with each other. 0:15:25.480 --> 0:15:28.200 We want to diverge by X on this, and why 0:15:28.280 --> 0:15:30.360 on the other Let's just get on with it, stop 0:15:30.360 --> 0:15:33.560 coming out the excuses, and let's make everything better for 0:15:33.600 --> 0:15:36.200 everyone else. And I think that he has the backing 0:15:36.280 --> 0:15:39.840 and the confidence from from the European leaders which his 0:15:39.920 --> 0:15:44.480 predecessor did not have. So bloody blah blah, stunning has 0:15:45.200 --> 0:15:48.840 come down to a level which is I think fairly priced, 0:15:49.160 --> 0:15:53.440 if not cheap, under pretty much every monitor. So as 0:15:53.440 --> 0:15:56.120 far as I'm concerned, do I think stuning will be 0:15:56.200 --> 0:15:58.040 higher in a year's time. Absolutely? Do I think the 0:15:58.040 --> 0:16:01.240 stock market in the UK will be higher? Absolutely? It 0:16:01.360 --> 0:16:03.640 might have some wi wobbilis, of course, but I think 0:16:03.680 --> 0:16:06.320 it's it's one of the gifts of all Right, So 0:16:06.360 --> 0:16:10.560 Marcus asking me the time period we're uh, the UK 0:16:10.680 --> 0:16:12.080 and the EU and the US are gonna have to 0:16:12.080 --> 0:16:14.880 get down to hard work about bilateral trade deals. What 0:16:14.920 --> 0:16:17.080 do you think the market's discounting as it relates to 0:16:17.440 --> 0:16:20.520 those negotiations. Well, it's funny you'd say that, because that's 0:16:20.560 --> 0:16:22.320 exactly the way I think. I think it's a three 0:16:22.320 --> 0:16:24.200 way deal. It's going to be done, and it needs 0:16:24.200 --> 0:16:26.840 to be done that way. If we have intelligence to 0:16:27.440 --> 0:16:29.400 link in the fact that the U, EU and the 0:16:29.480 --> 0:16:32.840 US absolutely needs a deal and vice versa to each other. 0:16:33.160 --> 0:16:35.440 Why not trying to do one big, happy deal? Now, 0:16:35.480 --> 0:16:38.160 I know that's that's a land of fantasy, but that's 0:16:38.160 --> 0:16:40.240 where we ought to go heading towards. And I think 0:16:40.520 --> 0:16:44.160 the cently coordination much more now between the UK and 0:16:44.200 --> 0:16:47.200 the US, and it's whether you can get over itself 0:16:47.640 --> 0:16:51.960 and work out what with a massively declining manufacturing setcher 0:16:52.000 --> 0:16:55.680 in Germany and the France in on riots and riots 0:16:55.680 --> 0:16:58.920 a variety of other problems with governments across Europe that 0:16:58.960 --> 0:17:02.600 they could do with a big, nice, lovely fat trade 0:17:02.640 --> 0:17:05.679 deal to keep everyone happy in I'm going to be 0:17:05.720 --> 0:17:08.160 optimistic and think it can be done, and I think 0:17:08.440 --> 0:17:12.080 we've seen that that whether Donald Trump caved in or 0:17:12.119 --> 0:17:14.359 the Chinese cajun I'm not getting to the semantics of that, 0:17:14.400 --> 0:17:16.600 but certainly it's the first bottle of trade deal has 0:17:16.640 --> 0:17:19.320 been done. There are is a way forward. In twenty 0:17:19.440 --> 0:17:23.480 was a very big year outside your UK equities, I 0:17:23.480 --> 0:17:27.520 think can still be okay, if not better than okay, 0:17:27.760 --> 0:17:30.840 if the world's government's get out of themselves. So you 0:17:30.880 --> 0:17:34.560 said that you think that UK assets are dramatically undervalued 0:17:34.600 --> 0:17:37.639 heading into and that this is a gift for people 0:17:37.640 --> 0:17:40.679 who can bet on some of the stocks and bonds 0:17:40.720 --> 0:17:44.040 and housing and anything else. I'm wondering how the economy 0:17:44.080 --> 0:17:47.080 factors in because we are looking at a potential contraction 0:17:47.080 --> 0:17:51.080 in the UK economy for the fourth quarter. I think 0:17:51.080 --> 0:17:53.040 it's noise with its contract. I don't think it will contract, 0:17:53.080 --> 0:17:55.040 but let's us say it does. It doesn't mean anything. 0:17:55.560 --> 0:17:59.400 Um there's a massive fiscal spending splurgs coming. I still 0:17:59.640 --> 0:18:02.359 think if you read what all right, that that probably 0:18:02.400 --> 0:18:05.720 the next cut, the next movement banging and should be 0:18:05.760 --> 0:18:08.159 a cut, but it will be an insurance cut like 0:18:08.200 --> 0:18:10.520 the Fed's done three already. There will be a hockey 0:18:10.520 --> 0:18:14.359 stick squish um coming when that that physical spending kicks 0:18:14.359 --> 0:18:16.320 in and a bit of a Brexit bounce and all 0:18:16.359 --> 0:18:18.400 that sort of stuff. But I think the banking will 0:18:18.400 --> 0:18:21.480 try that to resist cutting. But if they need to, 0:18:21.600 --> 0:18:25.520 let's cut basis points doesn't really matter. The point is 0:18:25.520 --> 0:18:28.960 is that the economy is very soft, because that is 0:18:29.000 --> 0:18:32.960 why Boris Johnson won, because the economy was absolutely going 0:18:33.000 --> 0:18:37.440 into into a into a absolute channel of doom because 0:18:37.640 --> 0:18:40.560 of this extended Brexit nightmare which he is about to 0:18:40.600 --> 0:18:42.600 get us out of. Whether you agree with that or not, 0:18:43.080 --> 0:18:47.359 it's just what's happening. It's democratically put forward. The EU 0:18:47.480 --> 0:18:51.840 itself needs to realize the fact that it's second thirdligest 0:18:51.880 --> 0:18:54.080 members leaving the fifth lige economy world is leaving it 0:18:54.520 --> 0:18:57.119 and it needs to shape shift and get over itself 0:18:57.200 --> 0:18:59.800 and make a deal. And I think that can be 0:19:00.040 --> 0:19:03.320 done politics aside by the end of the year. It 0:19:03.400 --> 0:19:05.080 may not be the full deal. I think that's where 0:19:05.080 --> 0:19:06.960 the fudge comes. We've seen this for the US China 0:19:07.080 --> 0:19:09.920 trade deal, a nice little phase one deal by this 0:19:10.080 --> 0:19:12.400 time next year, and then we have Phase two which 0:19:12.480 --> 0:19:15.440 fills in all the gaps. That's that's the direction travel 0:19:15.520 --> 0:19:17.920 and I think the markets will will probably see through 0:19:18.000 --> 0:19:20.440 that over the course of the year, see through the politics, 0:19:20.920 --> 0:19:24.440 and all things being equal, it should be better for 0:19:24.520 --> 0:19:27.760 the europe stock markets and better for the UK and 0:19:27.880 --> 0:19:29.800 and hopefully better for the US as well. So Marcuts 0:19:29.880 --> 0:19:31.480 just give us a just some color as to how 0:19:31.560 --> 0:19:34.560 this will actually proceed over the next days, weeks, months, 0:19:34.680 --> 0:19:38.600 the negotiations if any in terms of ratifying this Brexit 0:19:38.640 --> 0:19:41.280 deal between the UK and the EU. What are the 0:19:41.320 --> 0:19:46.240 actual steps in timing? Well, we have um the withdrawal agreement, 0:19:46.280 --> 0:19:48.520 build the web, if you want to call it, coming 0:19:48.640 --> 0:19:51.639 through first steps or second steps. Technically, um, right here, 0:19:51.720 --> 0:19:53.639 right now, in the next couple of days, that'll be 0:19:53.720 --> 0:19:57.199 formally rapti fied um. But later in January, and then 0:19:57.280 --> 0:20:00.159 we're out of the Upean union from the by the 0:20:00.240 --> 0:20:03.200 end of Janut one. Then we're go into this period 0:20:03.359 --> 0:20:07.600 of negotiating in the transition period which the EU classic 0:20:07.760 --> 0:20:11.040 EU are trying to limit in June July. And you can't, 0:20:11.080 --> 0:20:12.479 you know, you must tell us we can extend. By 0:20:12.600 --> 0:20:15.200 this period, all this will be washed away. I'm sure 0:20:15.240 --> 0:20:17.920 of it, because it's it's just roadblocks that they're putting 0:20:17.920 --> 0:20:21.720 there to try and help their own procrastination, which which 0:20:21.800 --> 0:20:23.880 suits their their sides. They don't really want to face 0:20:23.960 --> 0:20:26.119 up the reality of the fact. As I said, the 0:20:26.280 --> 0:20:30.080 largest colom the world is exiting um their single market. 0:20:30.200 --> 0:20:32.000 But it needs to be done in an elegant way 0:20:32.200 --> 0:20:36.480 for everyone either side. All the important stuff like aircraft 0:20:36.560 --> 0:20:41.120 flying and pharmaceutical licensing can be done in a heartbeats 0:20:41.160 --> 0:20:44.000 already there. Um, it's it's a bit more motive on 0:20:44.119 --> 0:20:47.680 certain things, on certain tariffs, and of course financial services 0:20:47.800 --> 0:20:50.119 is something which will probably at the very end of it. 0:20:50.400 --> 0:20:52.680 It always is, but you know, there is ability to 0:20:52.760 --> 0:20:56.440 get a bare bones deal done by December twenty, which 0:20:56.440 --> 0:20:59.080 is the circled end the transition period which boris Johnson's 0:20:59.160 --> 0:21:01.440 and Dust announced today that he's going to make sure 0:21:02.200 --> 0:21:05.199 he is stuck to That is meaningless because he can 0:21:05.240 --> 0:21:09.000 actually introduce a bill a month beforehand and extended. But 0:21:09.119 --> 0:21:11.680 it's just a signal. What's it is? Marcus, Thanks so 0:21:11.760 --> 0:21:14.120 much for joining us. I really appreciate your commentary. Marcus 0:21:14.200 --> 0:21:17.879