WEBVTT - The Odds Are Increasing For A Second Brexit Referendum 0:00:02.600 --> 0:00:05.320 Welcome to the Bloomberg Penel podcast. I'm Paul swing you, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits. 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 penl podcast on Apple 0:00:15.520 --> 0:00:17.960 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.920 that Bloomberg dot com. Could there be another UK referendum 0:00:24.040 --> 0:00:27.200 on leaving the European Union? Today we heard from Prime 0:00:27.240 --> 0:00:30.640 Minister Theresa May who seemed to put that squarely back 0:00:30.840 --> 0:00:34.720 on the table, which really raises questions about whether this 0:00:34.840 --> 0:00:37.680 time maybe this is going to happen. To raise Raphael 0:00:37.720 --> 0:00:41.120 Bloomberg Opinion editor, joining us now from London to raise 0:00:41.520 --> 0:00:44.639 what what actually happened today? High They said, well, this 0:00:44.720 --> 0:00:47.280 was May's last roll of the dice, so talks with 0:00:47.400 --> 0:00:51.800 the Labor Party broke down last week. May has promised 0:00:52.000 --> 0:00:55.520 to bring her Withdrawal Agreement Bill, which is the bill 0:00:55.560 --> 0:00:58.200 that implements the Brexit deal, to Parliament next week and 0:00:58.320 --> 0:01:02.680 she needed to do something uh quite dramatic to overcome 0:01:02.760 --> 0:01:06.320 the wall of opposition she has faced in Parliament, which 0:01:06.400 --> 0:01:09.399 is delivered three defeats of her Brexit deal. So what 0:01:09.520 --> 0:01:13.760 she's done is promised a number of measures, some of 0:01:13.800 --> 0:01:17.520 which are not going to be controversial, so environmental protection 0:01:17.640 --> 0:01:20.680 levels maintaining at the same level as the EU, workers 0:01:20.800 --> 0:01:24.240 rights being aligned with the EU. But the the sort 0:01:24.280 --> 0:01:27.120 of headline is that she has given the MPs a 0:01:27.280 --> 0:01:30.319 vote on whether to hold a second referendum and she 0:01:30.480 --> 0:01:35.319 is promising some kind of customs compromised. She didn't tell UH, 0:01:35.360 --> 0:01:37.600 she didn't tell us today what that would be, but 0:01:37.680 --> 0:01:40.759 she has said it will be a temporary customs union 0:01:41.400 --> 0:01:44.640 type compromise rather than the permanent one that the UH 0:01:44.840 --> 0:01:48.800 Labor Party had asked for. But thereas there's a catcher, right, 0:01:48.800 --> 0:01:51.520 I mean, this doesn't something have to happen first before 0:01:51.720 --> 0:01:55.360 this can all occur. Well, there's always a catch with 0:01:55.600 --> 0:01:58.639 with brexit. UH. The withdrawal Bill has to go into 0:01:58.920 --> 0:02:02.400 a second reading, which allows the MPs to make amendments 0:02:02.440 --> 0:02:06.040 to it, so that UH, so that all of these 0:02:06.080 --> 0:02:10.120 different changes that different MPs want UH can be UH 0:02:10.280 --> 0:02:13.520 can be put forth. It has to be approved to 0:02:13.639 --> 0:02:16.560 be put forward to the MPs, which it probably will 0:02:16.639 --> 0:02:19.720 because it's being changed substantially. But you know, I think 0:02:19.720 --> 0:02:22.840 the real question is whether she's overcome enough of the 0:02:22.840 --> 0:02:26.399 opposition from both the Labor Party and from her Conservative 0:02:26.520 --> 0:02:31.239 backbenches to cobble together a majority here. Um, you know, 0:02:31.280 --> 0:02:33.480 we've yet to see the reaction, We've yet to see 0:02:33.480 --> 0:02:36.720 what the exact details are. We don't know how Thursday's 0:02:36.720 --> 0:02:40.080 European Parliamentary elections are going to play out. But just 0:02:40.200 --> 0:02:42.919 looking at it, you know, from a few minutes after 0:02:43.000 --> 0:02:45.760 she's spoken, it's really hard to see how this does enough. 0:02:46.320 --> 0:02:50.520 My one caveat is it depends on fear. How much 0:02:50.560 --> 0:02:53.640 do MPs fear no deal? How much do they fear 0:02:53.680 --> 0:02:56.800 a Jeremy Corbin leadership. If you're a conservative voter, how 0:02:56.919 --> 0:02:59.880 much do they fear Nigel Farage is Brexit party, which 0:02:59.919 --> 0:03:02.520 is been rising in the polls. If there's enough fear, 0:03:02.840 --> 0:03:05.040 maybe she has a chance. It's interesting when you talk 0:03:05.080 --> 0:03:07.200 about the reaction. I'm looking at the pound and the 0:03:07.240 --> 0:03:10.360 initial reaction just that the concept of a second referendum 0:03:10.880 --> 0:03:13.799 was incredible. It was a spike in the pound versus 0:03:13.800 --> 0:03:17.680 the dollar. Uh that has since retreated almost entirely as 0:03:17.680 --> 0:03:20.000 people look through the fine print and see that, you 0:03:20.040 --> 0:03:22.239 know what this is just a carriage try to get 0:03:22.280 --> 0:03:25.239 some MPs through this process to at least not totally 0:03:25.280 --> 0:03:29.519 snubbed their nose on voting. Yet again, does this make 0:03:29.680 --> 0:03:32.720 does what happened today and Theresa May's proposal make it 0:03:32.800 --> 0:03:35.280 more likely that there will be a second referendum or 0:03:35.360 --> 0:03:38.160 is it just basically paying lip service and trying to 0:03:38.160 --> 0:03:40.760 throw a bone enough to get this thing through. Well, 0:03:40.800 --> 0:03:44.120 I would say a second referendum has become marginally more likely, 0:03:45.200 --> 0:03:47.840 both after her speech but even before that, because a 0:03:47.840 --> 0:03:50.480 a new Tory leader. She has said she will step down. 0:03:50.840 --> 0:03:54.280 There is a reasonable presumption that a hard Brexit or 0:03:54.320 --> 0:03:56.760 someone who wants a hard no deal exit will take 0:03:56.760 --> 0:03:59.720 her place if that happens. If we get to October 0:03:59.760 --> 0:04:04.240 three first, if Parliament somehow refuses to allow a no Deal, 0:04:04.360 --> 0:04:07.120 there's still a likelihood that this could go to another 0:04:07.240 --> 0:04:10.040 vote before it goes to a general election, which both 0:04:10.040 --> 0:04:12.320 parties want to avoid. Now, so I think the chances 0:04:12.360 --> 0:04:14.960 of a second referendum are getting a little bit stronger. 0:04:15.640 --> 0:04:19.000 So Theresa, what is the future of Theresa May right now? 0:04:19.040 --> 0:04:21.360 How long does she have left? Would you guess? Well, 0:04:21.400 --> 0:04:24.520 she has very little time left. She will probably announce 0:04:24.560 --> 0:04:29.240 her a timetable for her departure once this vote happens, 0:04:29.480 --> 0:04:32.120 but she has said she will go regardless. So you know, 0:04:32.200 --> 0:04:36.040 even if her dream scenario plays out and she gets 0:04:36.080 --> 0:04:38.160 a Brexit deal through, she has still announced that she 0:04:38.200 --> 0:04:40.880 will leave. So I think we are likely to see 0:04:41.120 --> 0:04:43.599 you know, the leadership race is already underway. We may 0:04:43.760 --> 0:04:45.960 very well see a new Tory Party leader and a 0:04:45.960 --> 0:04:48.240 new Prime Minister before the end of the summer. We 0:04:48.279 --> 0:04:52.200 know that several members of the European Commissioned European Union 0:04:52.440 --> 0:04:55.760 have supported another referendum, would like to see this whole 0:04:55.800 --> 0:04:59.560 thing go away and the UK just simply rejoin the 0:04:59.560 --> 0:05:02.840 European in Union. Are they involved at all in this 0:05:02.880 --> 0:05:07.480 whole process as it's sort of muddles through Parliament. Well, 0:05:07.520 --> 0:05:09.600 we'll have to see what sort of reaction we get there. 0:05:09.640 --> 0:05:12.680 But from the list of ten changes that she announced today, 0:05:12.680 --> 0:05:16.400 I couldn't see any that would really bother the EU. 0:05:16.480 --> 0:05:18.320 They will, you know, they were pleased that there were 0:05:18.400 --> 0:05:21.080 cross party talks and and and I think there was 0:05:21.120 --> 0:05:23.880 a measure of dismay when they broke down. Um, I 0:05:23.920 --> 0:05:25.920 think the EU is sort of braced for the worst. 0:05:25.960 --> 0:05:30.040 Their brace for Theresa may uh leaving the scene and 0:05:30.120 --> 0:05:32.760 for a hard Brexitter taking her place, so that I 0:05:32.839 --> 0:05:35.120 think they'll be They'll be happy to see one last 0:05:35.200 --> 0:05:38.240 roll of the dice and and hopeful that it turns 0:05:38.320 --> 0:05:42.360 up either agreement to her deal or possibly UH move 0:05:42.440 --> 0:05:44.599 towards a second referendum. But at this stage I don't 0:05:44.640 --> 0:05:49.680 think on any side of anyone is counting on that happening. Well, 0:05:49.720 --> 0:05:52.719 Theresa who is is the right front runner to replace 0:05:53.040 --> 0:05:55.880 Theresa May? I think if the front runner we'd have 0:05:55.960 --> 0:06:00.120 to say as Boris Johnson. He is uh the the 0:06:00.120 --> 0:06:04.080 the best known Conservative figure. He's the one that a 0:06:04.120 --> 0:06:07.320 lot of Tories believe is best place to take on 0:06:07.440 --> 0:06:10.880 Jeremy Corbyn. And now you know, Nigel Farage is Brexit 0:06:10.960 --> 0:06:14.200 party which is winning over a lot of Conservative votes. 0:06:14.400 --> 0:06:17.520 And of course he is a real Brexitter who has 0:06:17.920 --> 0:06:21.960 UH advocated leaving even with the no deal, so he 0:06:22.000 --> 0:06:27.200 would be amenable uh to UH to either not negotiating 0:06:27.240 --> 0:06:30.000 at all or negotiating a a new arrangement. But he 0:06:30.000 --> 0:06:32.839 would be UH the He would be certainly the preferred 0:06:32.880 --> 0:06:36.640 choice of the Conservative Party members and it is likely 0:06:36.720 --> 0:06:39.760 they who will get to choose because the Parliamentary Party 0:06:39.960 --> 0:06:43.320 would submit two names to the membership, and the membership 0:06:43.720 --> 0:06:47.640 um are are pretty unequivocally for Boris just thirty seconds 0:06:47.680 --> 0:06:51.440 Boris Johnson and I tell Farrage. Could either of them win? 0:06:53.200 --> 0:06:56.240 Could either of them win the election? Win in a 0:06:56.320 --> 0:06:59.360 general election? For Farrage, it's still a big uphill battle. 0:06:59.360 --> 0:07:01.960 Britain's parlia mentory system as a first past supposed system, 0:07:02.000 --> 0:07:05.159 so small parties don't tend to do well. But that said, 0:07:05.400 --> 0:07:08.160 I've just seen him in the West Midlands. He has 0:07:08.200 --> 0:07:12.720 exactly those ambitions. So as Raphael Bloomberg Opinion editor, thank 0:07:12.720 --> 0:07:17.640 you so much calling in from London. Well. Rising trade 0:07:17.680 --> 0:07:20.920 tensions with China have royal financial markets over the past 0:07:20.920 --> 0:07:23.520 several weeks, yet they are still holding onto double digit 0:07:23.520 --> 0:07:25.760 gains in SMP. To get a sense of where we 0:07:25.800 --> 0:07:29.120 go from here, return to Jonathan McKay john as head 0:07:29.120 --> 0:07:32.679 of sales for the Wealth Management Solutions at Schroeder's based 0:07:32.680 --> 0:07:35.720 in New York City. John, thanks so much for joining us. Boy, 0:07:35.760 --> 0:07:37.680 it's been a kind of a bumpy last couple of 0:07:37.680 --> 0:07:39.840 weeks and the trade tensions have kind of come back 0:07:40.000 --> 0:07:43.480 into investors focus. How does that fit into your view 0:07:43.560 --> 0:07:47.600 of the equity markets? Currently. Thanks Paul for having me 0:07:47.640 --> 0:07:50.600 and shout out to your optimism over a our excitement 0:07:50.680 --> 0:07:53.480 or a second potential second referendum in the UK. It's 0:07:53.480 --> 0:07:57.920 been my call, share share, I share that excitement. So 0:07:58.120 --> 0:08:02.040 OURBU is that the mark it should be lower UM, 0:08:02.120 --> 0:08:05.200 specifically US markets. I think there's way too much optimism 0:08:05.200 --> 0:08:09.560 of the reaction function of UM, both policymakers from a 0:08:09.560 --> 0:08:12.680 political perspective as well as from essential bank perspective and 0:08:12.760 --> 0:08:14.640 what they can do to offset the risks of the 0:08:14.680 --> 0:08:17.240 trade war. The rally at the beginning of the year 0:08:17.320 --> 0:08:19.560 was basically built on a three legged stool. You had 0:08:19.680 --> 0:08:24.160 cheap valuations start with, and optimism over the growth outlook 0:08:24.200 --> 0:08:26.120 given where we were in the fourth quarter of last year, 0:08:26.160 --> 0:08:28.120 which was essentially that the U S economy was at 0:08:28.200 --> 0:08:31.480 risk of going into recession, a dobash turn by central banks, 0:08:31.520 --> 0:08:34.080 as well as optimism around the trade deal. You've knocked 0:08:34.080 --> 0:08:37.800 out one of those legs UM with their rising escalation 0:08:37.840 --> 0:08:40.400 and trade tensions here with China UM, so then you 0:08:40.400 --> 0:08:44.440 get back to well dovash central banks help at the margin. UM. 0:08:44.520 --> 0:08:46.400 The growth outlook isn't as bad as it was in 0:08:46.480 --> 0:08:48.480 the fourth quarter of last year, but it's not that good, 0:08:48.920 --> 0:08:50.880 and the earnings outlook isn't that good. So why should 0:08:50.920 --> 0:08:54.439 markets rally um after rallying this year at the levels 0:08:54.440 --> 0:08:57.120 are currently at. So I think there's more downside potential 0:08:57.120 --> 0:08:59.120 from him than there is upside even in a good 0:08:59.120 --> 0:09:03.520 outcome in the trade are how much downside? It's tough 0:09:03.559 --> 0:09:05.760 to say. I mean, look, you're three to four percent 0:09:05.920 --> 0:09:08.960 down um off the peak, somewhere in that range um. 0:09:09.160 --> 0:09:11.960 The US equity market is still trading at roughly sixteen 0:09:12.000 --> 0:09:15.000 and a half times forward pe. I think there's too 0:09:15.080 --> 0:09:18.000 much optimism of our earnings growth. So if earnings estimates 0:09:18.000 --> 0:09:19.960 actually come down as we moved through the second and 0:09:19.960 --> 0:09:23.120 third quarter, the marketing theory get richer, right, unless that 0:09:23.240 --> 0:09:26.080 multiple decline. So I think a multiple suwhere in the 0:09:26.120 --> 0:09:28.400 range of sort of fifteen to fifteen and a half, 0:09:28.480 --> 0:09:30.679 it's fairer value for the US equity market, which means 0:09:30.679 --> 0:09:32.920 you've got probably you know, somewhere in the somewhere in 0:09:32.920 --> 0:09:35.520 the range of about five to seven percent additional downside. 0:09:35.720 --> 0:09:39.240 So you started off commenting on Paul Squeeney's excitement about 0:09:39.280 --> 0:09:42.920 another referendum in Great Britain, and I have to wonder 0:09:42.960 --> 0:09:45.079 how much of a game changer that would be from 0:09:45.120 --> 0:09:49.120 an asset perspective. Currently looking at the pound that is 0:09:49.200 --> 0:09:51.760 gaining a versus the dollar, but not by that much, 0:09:51.800 --> 0:09:53.599 So it seems like it's not exactly as if the 0:09:53.640 --> 0:09:56.520 markets are pricing in this possibility. But is this something 0:09:56.679 --> 0:10:01.360 that would materially change your outlook for European assets? Uh? Yes, 0:10:01.400 --> 0:10:04.280 it would make us. So we're already on a relative basis, 0:10:04.280 --> 0:10:08.480 we're already more optimistic about European equities. Um, even with 0:10:08.760 --> 0:10:11.040 all the turmoil that you've seen happening in the UK 0:10:11.200 --> 0:10:13.880 over the last six months or so, UM, all the 0:10:13.920 --> 0:10:17.640 Theresa A deals coming to a getting rejected, etcetera. Um, 0:10:17.679 --> 0:10:19.640 then we are relative to the US. It doesn't mean 0:10:19.640 --> 0:10:22.760 we expect gangbuster returns in Europe, but expectations are lower 0:10:22.800 --> 0:10:26.000 earning his growth is actually better based on consensus expectations 0:10:26.000 --> 0:10:27.840 in Europe than it is in the US. And we 0:10:27.880 --> 0:10:30.680 think the dollars over valued and should decline versus the euro. 0:10:30.720 --> 0:10:33.000 And that helps you from a total re term perspective 0:10:33.040 --> 0:10:35.719 if you're a US based investor, so you added in 0:10:36.360 --> 0:10:39.280 a second referendum with a likelihood that it actually gets passed, 0:10:39.280 --> 0:10:42.360 that they stay UM in the euro in the European Union. 0:10:42.640 --> 0:10:45.520 I think that would definitely help sentiment and provide UM, 0:10:45.559 --> 0:10:48.240 you know, a little bit of more bullish upside for 0:10:48.320 --> 0:10:51.240 European equities as a whole. But I'd be a little 0:10:51.240 --> 0:10:53.200 bit cautious. I was being a little bit cynical about 0:10:53.240 --> 0:10:55.960 jumping on Paul's bandwagon there, just because we've seen so 0:10:56.000 --> 0:10:58.720 many false starts over the past six months. But if 0:10:58.720 --> 0:11:01.240 it does move down that direction, I think we can UM, 0:11:01.280 --> 0:11:03.960 you know, we can get more bullish on Europe. John. 0:11:03.960 --> 0:11:06.079 I'm looking at the w I RP function on the 0:11:06.120 --> 0:11:09.520 Bloomer terminal, which and it shows that the investors are 0:11:09.520 --> 0:11:12.120 looking roughly seventy percent of investors are looking for a 0:11:12.240 --> 0:11:15.400 rate cut by the Fed. By your end, what is 0:11:15.400 --> 0:11:18.520 your view? So I think that's look at rates are 0:11:18.520 --> 0:11:20.120 going to head lower at some point. Right we're near 0:11:20.120 --> 0:11:21.960 the nearer the end of the cycle than we are 0:11:22.040 --> 0:11:24.560 near the beginning. I think there's a little bit too 0:11:24.600 --> 0:11:27.960 much optimism in UM the likelihood of a rate cut. 0:11:28.520 --> 0:11:30.679 I think part of that is because of the escalation 0:11:30.679 --> 0:11:32.719 in the trade war and the fear that UM if 0:11:32.760 --> 0:11:36.559 we do putariffs that does move forward on the remaining 0:11:36.559 --> 0:11:39.880 three billion dollars of Chinese inputs, and then China retaliates, 0:11:39.880 --> 0:11:41.920 the count retaliate, and kind that they can do other 0:11:42.000 --> 0:11:46.000 things to try and hold our economy indirectly. UM that 0:11:46.080 --> 0:11:48.679 the federal react in the automatically cut rates. What everyone's 0:11:48.679 --> 0:11:52.120 forgetting is that that adds to inflationary pressures. We saw that, 0:11:52.280 --> 0:11:54.760 you know, the primary example of being washing machine prices 0:11:54.800 --> 0:11:57.120 at the beginning of last year, and so you'd get 0:11:57.120 --> 0:12:00.640 a direct follow through to UM core goods price inflation 0:12:00.679 --> 0:12:03.120 going up, not to mention wage inflation which has been 0:12:03.200 --> 0:12:05.840 rising for the past three to four years. So I 0:12:05.840 --> 0:12:08.360 think the Fed would cut rates, but probably not as 0:12:08.440 --> 0:12:10.760 quickly and as much as the market is hoping for. 0:12:11.679 --> 0:12:15.120 John McKay one quick question, Hi, yould bonds pro or 0:12:15.160 --> 0:12:23.240 anti anti? Why elaborate there? I'll give you. So the 0:12:23.400 --> 0:12:26.480 quick story is valuations a way too rich. Um. If 0:12:26.480 --> 0:12:28.560 you think corporate earnings are slowing down, the amount of 0:12:28.559 --> 0:12:30.960 debt that UM corporates in the US have taken on 0:12:31.040 --> 0:12:33.800 over the past seven or eight years, UM, they're gonna 0:12:33.800 --> 0:12:35.680 have to pay a price to that. Not suggesting a 0:12:36.040 --> 0:12:38.920 you know, a quick rise in the default rate, but 0:12:39.000 --> 0:12:41.960 you will see companies losing access to the capital markets, 0:12:42.000 --> 0:12:44.800 and thus investors will amount of higher risk premium meanings. 0:12:44.920 --> 0:12:48.240 Hi you old spreads will have to widen from current levels, 0:12:48.240 --> 0:12:51.720 which are around three sixty three eighty basis points off. 0:12:51.920 --> 0:12:53.719 I think we think there are better options out there 0:12:53.720 --> 0:12:57.160 for investors to get yield. I would throw non agency 0:12:57.240 --> 0:12:59.920 securitized out there, as well as certain parts of the 0:13:00.000 --> 0:13:02.719 E merging market debt universe. John McKay, well done, Thank 0:13:02.760 --> 0:13:04.360 you so much for joining us. John McKay a head 0:13:04.360 --> 0:13:08.440 of sales focusing on wealth management solutions at Schroeder's based 0:13:08.480 --> 0:13:14.520 in New York. Well, yesterday it was an odd day 0:13:14.600 --> 0:13:17.760 for the pending Sprint t Mobile merger. First, the FEC 0:13:17.960 --> 0:13:20.920 said that it was inclined to approve the deal. Then 0:13:20.920 --> 0:13:22.559 just a couple of hours later, the d o J 0:13:22.760 --> 0:13:25.640 said not so fast. So hopefully our next guest can 0:13:25.679 --> 0:13:28.640 help us clear things up. Jennifer Rees a senior litigation 0:13:28.640 --> 0:13:31.559 analysts for Bloomberg Intelligence. She joins us live here on 0:13:31.559 --> 0:13:34.200 the Bloomberg Interactive broke her studio, So, Jen, I have 0:13:34.240 --> 0:13:37.480 to admit, of my thirty years roughly of following communications deals, 0:13:37.480 --> 0:13:40.160 I don't ever recall the d O J and the 0:13:40.320 --> 0:13:43.160 f c C, you know, opining on the same day 0:13:43.160 --> 0:13:45.440 and having different views. What do you think is going 0:13:45.480 --> 0:13:47.719 on here? You know, it's really strange, And you are 0:13:47.760 --> 0:13:49.960 exactly right because I did some research on this and 0:13:50.000 --> 0:13:52.360 found the only one instance of the f c C 0:13:52.480 --> 0:13:55.480 and d o J disagreeing on ultimate outcome, and this 0:13:55.520 --> 0:13:58.160 was in the nineteen seventies, So you're thirty years before 0:13:58.160 --> 0:14:01.000 my time, before your time, Paulics exactly. So you're you're 0:14:01.080 --> 0:14:05.040 right on that this is really strange. Um, it's not. 0:14:05.160 --> 0:14:07.320 It remains to be seen what happens here to It 0:14:07.400 --> 0:14:09.040 just may be that the d o J needs a 0:14:09.080 --> 0:14:11.640 little bit more than what the companies have offered up 0:14:11.679 --> 0:14:14.199 to the FCC. And I think it's actually not surprising 0:14:14.240 --> 0:14:16.680 because you know, Sprint and T Mobile have offered to 0:14:16.720 --> 0:14:21.120 divest one of sprints prepaid brands, and they have two 0:14:21.160 --> 0:14:23.640 brands now. The other brand, Virgin Mobile, is very small 0:14:23.680 --> 0:14:26.200 compared to Boost Mobile, but still the d o J 0:14:26.360 --> 0:14:28.880 would want them to divest their entire twelve percent share, 0:14:29.200 --> 0:14:31.040 and they're not offering to do that. So it may 0:14:31.040 --> 0:14:33.880 be that they just need to divest both brands, or 0:14:33.960 --> 0:14:35.960 it may be that they need to divest more and 0:14:36.000 --> 0:14:39.000 not just the brands. In other words, satellites more business 0:14:39.000 --> 0:14:41.440 assets than what they've offered up to the FCC. So 0:14:41.480 --> 0:14:43.600 I think they may still have some room here to 0:14:43.640 --> 0:14:46.160 bargain with the Department of Justice. Well, certainly that's what 0:14:46.200 --> 0:14:48.200 the markets are betting on, because we're not seeing enough 0:14:48.200 --> 0:14:50.880 of a sell off in Sprint shares, which are down 0:14:51.040 --> 0:14:54.440 about two percent today following the game yesterday, and you're 0:14:54.440 --> 0:14:56.600 not seeing enough of a decline in the bonds of 0:14:56.640 --> 0:14:59.280 Sprint either to sort of represent the markets are writing 0:14:59.320 --> 0:15:01.600 off this deal. I mean, still it is being baked in. 0:15:01.760 --> 0:15:04.280 I'm trying to understand what could have happened. Don't the 0:15:04.400 --> 0:15:08.200 d o j uh and it doesn't do the DJ 0:15:08.360 --> 0:15:11.520 and FCC speak to each other. Yeah, they've been communicating 0:15:11.520 --> 0:15:13.760 the whole time, you know, during the year long investigation, 0:15:13.880 --> 0:15:17.600 and they've said publicly that they've been coordinating and communicating. 0:15:17.600 --> 0:15:20.520 So so the dual message yesterday was a little bit odd. 0:15:21.080 --> 0:15:23.080 It's hard to say what is happening there. But the 0:15:23.120 --> 0:15:25.480 FCC clearly wanted to come out with their decision. They 0:15:25.480 --> 0:15:28.440 were ready, They had extra time. Their their clock doesn't 0:15:28.520 --> 0:15:30.720 run until early June, so they didn't have to say 0:15:30.760 --> 0:15:33.280 anything when they did, and the Department of Justice may 0:15:33.320 --> 0:15:35.280 have been reacting to what they were seeing in the news. 0:15:35.360 --> 0:15:38.400 An immediate reaction by many that well, it's a given 0:15:38.400 --> 0:15:40.240 that the Department of Justice now is going to clear 0:15:40.280 --> 0:15:41.920 and maybe they just wanted to make the point look 0:15:42.160 --> 0:15:45.200 not so fast. We do our own independent investigation, we 0:15:45.280 --> 0:15:47.920 have a different standard, and in fact we may need more. 0:15:47.960 --> 0:15:50.400 And in my I'm not surprised by it, because I 0:15:50.440 --> 0:15:53.920 do actually think based on their standards, they do need more. 0:15:54.160 --> 0:15:56.800 You know, when when they accept a divestitor to remedy 0:15:56.840 --> 0:15:59.600 a deal, they need to replace all of the competition 0:15:59.640 --> 0:16:02.640 lost virtue of the merger. Twelve percent is being absorbed 0:16:02.680 --> 0:16:05.200 in this prepaid market, That entire twelve percent needs to 0:16:05.240 --> 0:16:07.600 go to a new competitor, and that isn't what's Britain 0:16:07.600 --> 0:16:10.080 Tea Mobile have offered up the FCC. Now. This is 0:16:10.120 --> 0:16:12.880 just on the prepaid side. It could also be that 0:16:12.920 --> 0:16:14.920 the Department of Justice has some issues on the post 0:16:14.920 --> 0:16:18.480 paid side, So the market's reaction may also be a 0:16:18.520 --> 0:16:21.120 little bit too optimistic in that it's unclear to me 0:16:21.200 --> 0:16:24.120 whether they are resolved on the post paid side. The 0:16:24.200 --> 0:16:26.360 numbers don't look quite as bad there in terms of 0:16:26.400 --> 0:16:29.600 the market share combined, which is at about and the 0:16:29.640 --> 0:16:32.600 concentration numbers. And it's in that area that they're going 0:16:32.640 --> 0:16:35.320 to look at the pro competitive consumer benefits that could 0:16:35.360 --> 0:16:38.080 come from this and balance that against some potential harm. 0:16:38.080 --> 0:16:39.520 But it's not a given that the d o J 0:16:39.720 --> 0:16:42.400 is over the hump there either. It's interesting that you 0:16:42.400 --> 0:16:45.480 know this. When the President Trump and Republican administration came 0:16:45.480 --> 0:16:47.920 into power, the expectation was, Okay, let's do M and 0:16:48.000 --> 0:16:49.360 A deals. The d o J is not gonna be 0:16:49.360 --> 0:16:51.760 a problem. But they were very, very tough on A 0:16:51.840 --> 0:16:53.960 T and T Time Warner. The appear to be taking 0:16:53.960 --> 0:16:55.800 a pretty strong stance here. What do you think is 0:16:55.840 --> 0:16:59.120 going on? You know, the the A T and T 0:16:59.120 --> 0:17:01.160 Time Warner deal. That was a big surprise, and I 0:17:01.160 --> 0:17:03.000 think it took a lot of people, particularly in the 0:17:03.040 --> 0:17:06.480 antitrust community, by surprise when that happened. And I think 0:17:06.520 --> 0:17:08.560 some of it just may simply be the fact that 0:17:08.960 --> 0:17:11.520 there was a lot of press about the fact that 0:17:11.560 --> 0:17:14.360 this new Republican administration would be so easy on mergers. 0:17:14.560 --> 0:17:16.080 And you know the fact is that if you go 0:17:16.160 --> 0:17:19.200 back in history and you look at statistics, the difference 0:17:19.200 --> 0:17:23.280 between Democratic administrations and Republican administrations and merger enforcement is 0:17:23.320 --> 0:17:26.679 it really only incremental? It really isn't as big as 0:17:26.760 --> 0:17:29.960 I think the reaction was when Donald Trump was elected 0:17:29.960 --> 0:17:32.320 and started to put the point his own people. You know, 0:17:32.400 --> 0:17:35.480 the difference tends to be in pursuing monopolistic conduct and 0:17:35.560 --> 0:17:38.439 things like that, and the Republicans do tend to look 0:17:38.480 --> 0:17:41.160 at efficiencies and give efficiencies a little more weight, let's say, 0:17:41.160 --> 0:17:44.320 than the Democrats. But it really is only an incremental difference. 0:17:44.600 --> 0:17:48.000 So I think the aggressiveness should have been expected in 0:17:48.040 --> 0:17:51.840 this age of these great big mergers and consolidated industries. Yes, 0:17:52.000 --> 0:17:55.040 still though a real head scratcher in terms of the 0:17:55.119 --> 0:17:58.359 dual messaging yesterday from the d o J and the FCC. 0:17:58.520 --> 0:18:01.560 Jennifer Ree, thank you very much much, really illuminating. Jennifer 0:18:01.600 --> 0:18:07.760 Rea's senior litigation analyst for Bloomberg Intelligence. Well, we are 0:18:07.800 --> 0:18:10.480 ten plus years into this financial psycho, We've got the 0:18:10.560 --> 0:18:13.800 Fed on the sidelines, and financial markets quite frankly, this 0:18:13.880 --> 0:18:17.879 year performed exceptionally well despite the near term volatility. To 0:18:17.920 --> 0:18:20.440 get a sense of where we go from here, Pleased 0:18:20.440 --> 0:18:23.680 to welcome our next guest, Christiana Mamani, chief investment officer 0:18:23.720 --> 0:18:26.960 and had a fixed income for Oppenheimer Funds, and Peter Straktowski, 0:18:27.400 --> 0:18:29.879 portfolio manager for Oppenheimer Funds. They joined us on our 0:18:29.880 --> 0:18:33.040 Bloomberg Interactive Broker Studio and to point out that Christian 0:18:33.040 --> 0:18:36.480 and Peter recently celebrated their ten year anniversary of the 0:18:36.480 --> 0:18:39.520 firm's investment grade Debt Team, which manages over six point 0:18:39.560 --> 0:18:42.800 six billion dollars primarily investment grade assets. So these folks 0:18:42.840 --> 0:18:46.080 have been doing this for a while. So Chrystial, let's 0:18:46.119 --> 0:18:49.360 start with you, um the rising trade tensions. How are 0:18:49.400 --> 0:18:54.000 you positioning the portfolio for what might be a prolonged 0:18:54.440 --> 0:18:57.719 heightened sense of trade concerns? Well, so, the first thing 0:18:57.760 --> 0:19:00.320 with respect to trade tensions to the fact that it's 0:19:00.359 --> 0:19:04.679 not a good outcome for anyone, despite what Trump or 0:19:04.800 --> 0:19:07.400 President She may be saying. It's bad for China, it's 0:19:07.440 --> 0:19:09.240 bad for the US. But I think what we need 0:19:09.280 --> 0:19:12.800 to focus on is the magnitude of that badness, if 0:19:12.800 --> 0:19:16.800 you will. So it's uh, it shaves off roughly half 0:19:16.840 --> 0:19:19.600 a percent from U S GDP and probably slightly more 0:19:19.640 --> 0:19:24.080 than that from the Chinese GDP. Uh, So it's a 0:19:24.200 --> 0:19:26.880 it's not a good outcome, but it's a manageable outcome, 0:19:26.920 --> 0:19:29.919 and I think our expectation is as a result of this, 0:19:30.280 --> 0:19:35.280 the likelihood of FED easing increases in and the likelihood 0:19:35.600 --> 0:19:40.520 of the Chinese policymakers trying to stimulate their economy to 0:19:40.600 --> 0:19:44.760 help help support that economy is probably increasing as well. 0:19:44.880 --> 0:19:47.320 So it's not a good outcome, but it's not the 0:19:47.400 --> 0:19:50.120 end of the world. After the D rating that took 0:19:50.160 --> 0:19:53.800 place last week, our expectations still that markets go higher 0:19:53.800 --> 0:19:55.760 and global equities is still the place to be. But 0:19:55.800 --> 0:19:57.639 that's what I was going to say, is that it 0:19:57.720 --> 0:20:00.920 sounds like this is a perfect environment for risk acids 0:20:00.960 --> 0:20:03.920 because it sounds like from what you're saying, there's gonna 0:20:03.920 --> 0:20:07.960 be more stimulus and FED easing, and certainly we have 0:20:08.080 --> 0:20:11.960 the ECB and others also moving into an easy stance. Peter, 0:20:12.119 --> 0:20:14.480 I'm just running from the fixed income standpoint, from investment 0:20:14.520 --> 0:20:17.880 great debt standpoint, which area of the market looks most 0:20:17.920 --> 0:20:22.600 attractive attractive given that backdrop. Okay, So I think, UH, 0:20:23.400 --> 0:20:25.480 despite what you hear or read somewhere else, I think 0:20:25.600 --> 0:20:29.639 that the US corporate sector UH still offers decent value 0:20:29.640 --> 0:20:32.120 over treasuries on average, that spreads on the trip will 0:20:32.119 --> 0:20:36.040