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Speaker 1: Who you put your trust in matters. Investors have put

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Speaker 1: their trust in independent registered investment advisors to the tune

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Speaker 1: of four trillion dollars. Why learn more and find your

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Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keane. Always with Michael McKee. Daily we bring

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Speaker 1: you insight from the best in economics, finance, investment, and

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Speaker 1: international relations. Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com,

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Speaker 1: and of course, on the Bloomberg. The other story of

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Speaker 1: the day that everybody's gonna be talking about, whether y're

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Speaker 1: not talking about Mario drag in the e c B

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Speaker 1: is the new Apple iPhone seven. A lot of technical changes,

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Speaker 1: better camera, YadA, YadA, YadA. The story of the day

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Speaker 1: for Apple and the iPhone is that they got rid

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Speaker 1: of the headphone jack. It's been around forever. All those

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Speaker 1: headphones that you have, Now you're gonna get wireless, Well,

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Speaker 1: you gotta buy them wireless headphones, wireless earbuds. Uh, They're like,

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Speaker 1: you cut the cord off and that's how you will listen.

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Speaker 1: Will anybody buy the iPhone now? Or is that going

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Speaker 1: to put people off the stock down four tenths in

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Speaker 1: pre market trading. It rose just six tenths of eight

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Speaker 1: percent yesterday. Gene Munster is with Piper Jaffrey. He is

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Speaker 1: the analyst who covers Apple there and Geene, you were

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Speaker 1: telling Fred and I at a short time ago that

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Speaker 1: you're more optimistic than most that Americans will accept the

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Speaker 1: idea of going wireless with their headphones. Yeah, because it's

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Speaker 1: a it's a better experience. And I think that they've

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Speaker 1: done this in the past, and they've eliminated, for example,

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Speaker 1: some optacle drives, and uh so, I think that they

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Speaker 1: have a history of kind of pushing the technology for

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Speaker 1: and the analog jack has been around for about seventy years,

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Speaker 1: and so I think it's about time we move away

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Speaker 1: from that. The other kind of surprising move is Apple

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Speaker 1: notorious when they make some small changes in their accessories

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Speaker 1: and how you plug your phone in to charge you

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Speaker 1: around somewhere thirty to forty dollars for a connector. In

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Speaker 1: this case, they're giving that connector away for free. So

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Speaker 1: all of your investment, your existing headphones where headphones is safe.

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Speaker 1: But they clearly, as you mentioned, Mike, they clearly want

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Speaker 1: to move you to this whole new paradigm. Uh, that

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Speaker 1: is different than Bluetooth too, will be easier to connect,

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Speaker 1: and ultimately people do prefer wireless, even though it's more expensive. Right,

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Speaker 1: But Jane, I feel cheated. I love Apple, I'm a user,

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Speaker 1: I'm not an analyst. I have to buy air pods,

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Speaker 1: which will cost me more than a hundred and fifty dollars.

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Speaker 1: They have a five hour battery life. I know they

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Speaker 1: have a you know, a battery charger in build, but

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Speaker 1: it's a hundred and fifty dollars and I feel like,

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Speaker 1: once again, Apple is forcing me to buy some think

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Speaker 1: that I may not want. Well, you can still just

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Speaker 1: use your Bluetooth wireless headphones, so that's still that still works.

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Speaker 1: They're giving you the option to to buy those more

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Speaker 1: expensive air pods. And and then separately is that there

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Speaker 1: will be They have beats right now obviously because they

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Speaker 1: own beats, but there's gonna be a lot of other

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Speaker 1: devices that will be have this. This the same kind

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Speaker 1: of air pods type of connection, and so I used

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Speaker 1: it yesterday at the event. It's just a much simpler

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Speaker 1: way to connect your headphones. So the simple answer, frant

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Speaker 1: is you're still gonna be able to use your old

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Speaker 1: Bluetooth headphones and if you want to pay up for

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Speaker 1: new headphones, then then you have to do that. Yeah,

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Speaker 1: here's the problem, Gene. I've probably still got the headphones

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Speaker 1: from the first iPhone I ever got. But the consensus

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Speaker 1: in the newsroom is you're gonna lose these things or

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Speaker 1: you're gonna lose one of them, and then you've only

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Speaker 1: got one years worth of listening and you've got to

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Speaker 1: go buy another one. And how how do they handle that? Well,

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Speaker 1: that's gonna be that they're probably gonna love that because

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Speaker 1: it's gonna force you to probably end up buying a

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Speaker 1: whole new set. And so um, what you've seen is

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Speaker 1: that the ones that they've shown that air pods are

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Speaker 1: two separate ones, and as you said, people are gonna

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Speaker 1: lose those. They'll come out with accessories that will make

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Speaker 1: it so it's going to be more difficult to lose those.

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Speaker 1: For example, things that will wrap around your ears so

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Speaker 1: they don't fall out is easy. But there's also going

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Speaker 1: to be many, many, uh new wireless devices that have

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Speaker 1: that air pod methodology for connecting that will be connected

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Speaker 1: just like Bluetooth. So a lot of the ones that

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Speaker 1: they showed from beats for example, you wouldn't fall out

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Speaker 1: and lose one for example, because they're connected so um.

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Speaker 1: I think that for those who do have air pods

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Speaker 1: that will be something frustrating. But for the other people,

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Speaker 1: I think they're just gonna be fine. Yeah, but for

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Speaker 1: the other people that you need an apter gene and

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Speaker 1: so you're buying into this, you think this is a

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Speaker 1: good move a to people won't if they realize in

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Speaker 1: two months that the overwhelming majority of their customers don't

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Speaker 1: like this. Can they reverse do they change course if

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Speaker 1: this goes wrong? What can they do to make it better? Well?

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Speaker 1: I think the probability that it goes wrong, just to

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Speaker 1: put in the perspective I think, is extremely low. And

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Speaker 1: part of the reason is that they made it backwards

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Speaker 1: compatible with that connector that I talked about that comes

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Speaker 1: with the phone. Separately, is your existing Bluetooth will work.

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Speaker 1: And third, if you want to push the envelope and

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Speaker 1: try something that connects more easily. I think the reason

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Speaker 1: why this will work is consumers are frustrated with how

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Speaker 1: Bluetooth works. Your your phone typically has many devices that

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Speaker 1: are connected on Bluetooth. Often you have to pair and

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Speaker 1: unpair and forget device to get it to work. And

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Speaker 1: this is just going to simplify this. In other words,

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Speaker 1: it is a better experience. And I think that better

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Speaker 1: experiences will win longer terms. But I don't think that

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Speaker 1: they're going to have to reverse course on this. Well,

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Speaker 1: is this the beginning of a whole move to a

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Speaker 1: wireless interconnectivity with the Apple experiences? Is everything going to

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Speaker 1: be wireless now, from the Macintosh to the iPhone to

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Speaker 1: the I Watch. Yeah, and when you pair these new

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Speaker 1: headphones that automatically pairs to all of your Apple devices,

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Speaker 1: And you're exactly right. Is the way we interface with

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Speaker 1: computers is changing. And our existing interfaces keyboard and mouse

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Speaker 1: and touchscreen, but in the future it's really going to

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Speaker 1: be voice driven and and even and even using your

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Speaker 1: thoughts and your eyes to drive his interface. And so

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Speaker 1: what you're seeing right now is just the very beginning

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Speaker 1: of what is going to be a new way to

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Speaker 1: interface with computing. Well, I was just gonna say, you

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Speaker 1: probably don't want to own Stock and Monster Cable these days?

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Speaker 1: Then I would I think that would be Uh. I

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Speaker 1: don't know much about the Stock, but it doesn't seem

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Speaker 1: like a good theme. Jean very quickly, what is the

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Speaker 1: one thing that actually we're miss understanding about Apple. The

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Speaker 1: watch hasn't really gone to plan. I don't mean to

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Speaker 1: sound so downbeat, but how can can they leverage actually

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Speaker 1: and make sure that they remain number one, especially when

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Speaker 1: you look at all the Asian producers. I think the

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Speaker 1: one piece that gets missed just over the next five years,

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Speaker 1: there's still a lot of innovation to go with the phone,

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Speaker 1: and I know that's not in consensus, but people think

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Speaker 1: that's innovation the smartphones over and this version of the

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Speaker 1: iPhone isn't as exciting as I think future versions will be. Specifically,

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Speaker 1: future versions will have a phone that flips and becomes

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Speaker 1: a tablet, them back to a phone, and then I think,

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Speaker 1: just down the road, there's going to be this, this

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Speaker 1: move towards um this this whole augmented reality experience that's

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Speaker 1: Pokemon Steroids with a lot of different aspects to it.

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Speaker 1: In other words, I think that they're franchise. The platform

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Speaker 1: is still going to yield some major improvements that we're

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Speaker 1: all going to benefit from. We'll get to the CB

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Speaker 1: in a few moments, but we want to wrap up

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Speaker 1: our decision, our discussion. Gene Munster from Piper Jaffrey about

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Speaker 1: Apple and the new iPhone. They also announced changes to

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Speaker 1: the operating system to the Apple Watch and ask you

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Speaker 1: about that at a second. But just before we do, uh,

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Speaker 1: John Tucker brought up a really interesting question. Apple's got

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Speaker 1: this China strategy. How do people in China afford these

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Speaker 1: new hundred and fifty headphones? Gene. I think the way

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Speaker 1: they do it is that there's going to be knockoffs

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Speaker 1: that we use the same connection protocol, so they probably

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Speaker 1: won't be behind the AirPods, but they'll probably buy iPhones

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Speaker 1: new iPhones and buy accessories that are much cheaper than

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Speaker 1: the hundreds and fifty dollars and that accessories. This is

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Speaker 1: just to put in the perspective. The hardware accessories for

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Speaker 1: Apple is about three total sales, So just to put

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Speaker 1: all those numbers in a perspective, Gene, what I'm concerned

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Speaker 1: about overall is that we underestimate the power of a

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Speaker 1: lot of the Asian producers, be at Huawei or be

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Speaker 1: even companies like them Samsung. I know they have a

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Speaker 1: major setback now with this ree call, but they are

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Speaker 1: actually the producers out there that are selling to the

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Speaker 1: emerging markets. Because they're so much cheaper that we're not

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Speaker 1: seeing in our markets yet or not, and they're more

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Speaker 1: much more competitive, as you said, in emerging markets. UH,

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Speaker 1: they have just they've been around, they've they've been dabbling.

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Speaker 1: Some of those companies you mentioned have been dabbling in

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Speaker 1: the US but just haven't gotten much strength. And the

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Speaker 1: reason is that people who have iPhones, especially in the US,

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Speaker 1: are really committed to it. It's something that we survey

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Speaker 1: a couple of times a year. The last few surveys

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Speaker 1: have been pent rebi rates. So I think a lot

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Speaker 1: of people on at listen to the US don't give

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Speaker 1: them an opportunity. But outside of the US they have

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Speaker 1: been more competitive some of those other ones. And I

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Speaker 1: think what we've seen is that just the Apple is

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Speaker 1: still gaining share, but at a at a slower pace

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Speaker 1: because of some of those cheaper phones. All Right. They

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Speaker 1: also announced an upgrade to the or an overhaul of

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Speaker 1: it I Watch and UH made some other announcements about

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Speaker 1: operating systems, etcetera. Su that up for us and what

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Speaker 1: impact it's going to have. The watches water proof and

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Speaker 1: it has built in GPS and if you're a watch fan,

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Speaker 1: you'll like it. If you're not, I'm not going to

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Speaker 1: change how you feel about to watch. The biggest event

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Speaker 1: in the watch is going to be in the next

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Speaker 1: few years, they'll likely decouple that from your iPhone, so

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Speaker 1: you can be able to take phone calls and do

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Speaker 1: text without having your phone with you. The other I

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Speaker 1: think big news that gets lost in this is what

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Speaker 1: they're doing with Apple Pay, and they mentioned that of

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Speaker 1: tap and pay transactions in the US are with Apple Pay.

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Speaker 1: They're going to in mobile browser in two weeks. And

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Speaker 1: what that means is it's going to be much easier

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Speaker 1: for to use Apple Pay on websites, whether you're on

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Speaker 1: your computer or on a website on your phone. And

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Speaker 1: I think that that could fundamentally change the payments landscape,

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Speaker 1: which is a bold comment, but I think that's been

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Speaker 1: largely missed in all the news and the last day.

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Speaker 1: Jim Uster, thanks for joining us this morning. From Piper

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Speaker 1: Jaffrey on Apple is stocked down in pre market trading

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Speaker 1: three tenths of eight percent. Who you put your trust

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Speaker 1: in matters. Investors have put their trust in independent registered

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Speaker 1: investment advisors to the tune of four trillion dollars. Why

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Speaker 1: they see their role is to serve, not sell. That's

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Speaker 1: why Charles Schwab is committed to the success of over

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Speaker 1: seven thousand independent financial advisors who passionately dedicate themselves to

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Speaker 1: helping people achieve their financial goals. Learn more and find

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Speaker 1: your independent advisor dot com. It is almost time for

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Speaker 1: the ECB decision. We're about eight minutes away or so.

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Speaker 1: Joining us now, Megan Green, the chief economist a manual

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Speaker 1: life asset management. UH. You've spent an awful lot of

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Speaker 1: time watching things in your UH. Does do you when

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Speaker 1: you look at what's happening in the European economy and

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Speaker 1: you look at where monetary policy is in Europe? Does

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Speaker 1: Mario Draggy have to do more? At this point? He

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Speaker 1: absolutely has to do more. Um. The question is when

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Speaker 1: exactly and how much pressure he feels to do more today?

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Speaker 1: And on that front, UM, I think we might all

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Speaker 1: be a little bit disappointed. The The e CP has

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Speaker 1: never been ahead of the game ever, UM, and I

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Speaker 1: don't think we can expect them to be this time around.

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Speaker 1: Mario Draggy would have to do something really drastic to

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Speaker 1: get inflation expectations up even anywhere close to the target

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Speaker 1: of just under two percent UM. The Arizone economy is

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Speaker 1: growing by around one and a half percent. That's pretty lackluster. Um.

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Speaker 1: You know, it would be great if the e CP

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Speaker 1: could help stoke that, but that would require dramatic actions,

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Speaker 1: and today I think we'll just get a series of

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Speaker 1: small tweaks. Megan. Will they address or at least acknowledge

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Speaker 1: the fact that there is just not enough things to

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Speaker 1: buy right there's a scarcity facing these asset purchases. I

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Speaker 1: think they'll have to There's a good chance they'll run

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Speaker 1: out of things to buy before the end of this

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Speaker 1: um quei program next March. UM. But even if they

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Speaker 1: can make it too next March, they won't be able

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Speaker 1: to make it much further. UM. No one knows exactly

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Speaker 1: what the ECB is holding, of course, and their price effects,

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Speaker 1: but they're starting to run low and so if they

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Speaker 1: do extend this qui program, they'll they'll absolutely have to

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Speaker 1: expand it as well. UM. One thing that they should

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Speaker 1: be looking into buying as equities UM, And it's not unprecedented.

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Speaker 1: The bo j's buying up equities right now. That could

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Speaker 1: help a bit. UM, But again, I don't think that

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Speaker 1: we'll hear Mario Draggy and outside today. I want to

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Speaker 1: ask you about that in a moment, because obviously that's

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Speaker 1: a controversial idea, but I want to set up the

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Speaker 1: decision coming out at the main refinancing rate, which is

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Speaker 1: zero right now, comes out the marginal lending facility basis

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Speaker 1: points in the deposit facility. Deposit rate is the one

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Speaker 1: everybody's been focused on, because that's the negative rate they're using.

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Speaker 1: It's a negative forty basis points right now. That's one

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Speaker 1: of the reasons they're running out of things to buy

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Speaker 1: is because they can't buy anything that's yielding below that,

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Speaker 1: and a lot of German debt is So could we

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Speaker 1: see a move in that today to give them more

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Speaker 1: room to expand their asset purchases. So I think that's unlikely, um,

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Speaker 1: in large part because of how much it's squeezing banks. UM.

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Speaker 1: And we've already just gone through an Italian banking crisis,

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Speaker 1: and I say just gone through it. We're still in one, really, um.

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Speaker 1: But the markets seem to be feeling more comforted about that.

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Speaker 1: Portuguese banks look pretty dicey as well. German banks don't

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Speaker 1: even look that great. Um. So even though we've had

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Speaker 1: the stress test results, I think there's a lot looming

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Speaker 1: on European bank balance sheets and cutting the deposit rate

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Speaker 1: further into negative territory UM would hurt them. What we

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Speaker 1: might see instead of having it just be that you

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Speaker 1: can't buy any assets yielding below that deposit rate, they

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Speaker 1: might tweak it and say that there's some kind of

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Speaker 1: weighted average of yields UM, so that you can technically

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Speaker 1: buy some assets that fall below that deposit rate, as

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Speaker 1: long as there are others that don't fall below it.

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Speaker 1: Like the problem is that they're nowhere near their targets

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Speaker 1: right there, no one near inflation growth. It's not in

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Speaker 1: the Monday, but growth is going nowhere. So he will

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Speaker 1: have to, I guess, reassure the markets in the news

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Speaker 1: conference that he's ready, that he has the tools to

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Speaker 1: do more. That's right, um. And not only that he

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Speaker 1: has the tools, but um that he's got the bonds

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Speaker 1: to buy um. You know, he's the announcement in included

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Speaker 1: that you know they'll buy assets until March or beyond UM,

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Speaker 1: but they're going to run out, and so he has

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Speaker 1: to provide some kind of comfort that they're going to

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Speaker 1: expand their QUI programs so that they can actually follow

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Speaker 1: through on that again, technical tweaks, right is the word

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Speaker 1: that I hear on. This is what markets will hope

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Speaker 1: Mario DROGGI will give hints of when he talks about QUI.

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Speaker 1: Will that be enough to reassure the markets that he

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Speaker 1: will do more? You know, I don't think it will be. Um.

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Speaker 1: Technical tweaks will help a little bit. UM, But the

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Speaker 1: QUI program hasn't been particularly particularly successful in terms of

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Speaker 1: boosting inflation expectations. In fact, they just keep falling further

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Speaker 1: and further UM. So the e CP is really going

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Speaker 1: to have to do something drastic. It's clearly not close

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Speaker 1: to that there. But I think, UM, if if we

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Speaker 1: want to know what the ECB is going to do,

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Speaker 1: we just have to look to the b O J.

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Speaker 1: It looks like the e cps following right in their footsteps,

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Speaker 1: and they're going to have to buy up more in

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Speaker 1: different kinds of assets UM and eventually get bolder UM

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Speaker 1: and possibly do things like helicopter money. Well, you also

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Speaker 1: mentioned equities, so let's ask about both of those things

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Speaker 1: in combination, buying equities or helicopter money. Helicopter money prohibited

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Speaker 1: by the charter in theory, because you can't monetize debt.

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Speaker 1: It would be hard to get that politically through, I

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Speaker 1: would think. And you've got a political problem with equities,

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Speaker 1: because whose equity? Even if you buy E t F

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Speaker 1: what country? I mean, do you try to base it

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Speaker 1: on capital key and then his stocks go up and down?

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Speaker 1: I mean you're constantly trying to juggle there. Yeah, so

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Speaker 1: you're right, there are legal challenges. There are lots of

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Speaker 1: legal challenges and Europe that um, all of a sudden

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Speaker 1: disappear like Kui or bailing out member states. UM. So

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Speaker 1: you know, Mario Jogging is a master consensus builder. He's

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Speaker 1: done a good job so far, and so UM, I

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Speaker 1: don't I wouldn't take these things off the table just

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Speaker 1: because they're politically challenging. Um. You're right, there are challenges

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Speaker 1: though with buying equities. UM, they'd have to put together

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Speaker 1: some kind of basket of equities. Um, it will be unpopular. Um.

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Speaker 1: It's worth keeping in mind that Germany has an election

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Speaker 1: coming up in Miracle's ratings have been falling pretty significantly,

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Speaker 1: so she'll be really reticent to sign up to anything

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Speaker 1: that will tell the German taxpayers that German money is

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Speaker 1: going to profligate weaker countries and in Europe. Um So

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Speaker 1: the politics are very challenging. Um. But then again, growth

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Speaker 1: is incredibly weak, Inflation is nowhere near their target and

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Speaker 1: won't be over the next five years. Um So, if

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Speaker 1: they really are going to stick to their mandate, I

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Speaker 1: think they're going to have to go ahead and buy

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Speaker 1: up equities. Speaking of froll Merkel, you told friend and

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Speaker 1: I earlier on Bloombergshire Balance TV that she has some

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Speaker 1: influence on what they ECB does or thinks. What about

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Speaker 1: the other way around. What if Mario drag who has

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Speaker 1: been going around saying we need more fiscal help, says

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Speaker 1: to you know, to her and to everybody else, you know,

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Speaker 1: we're at our limit, We're done, and the pressure is

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Speaker 1: on her and she's got to do something if she's

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Speaker 1: going to keep the economy propped up going into the election.

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Speaker 1: So they have been saying this actually for quite some

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Speaker 1: time now. Mario drag has repeated, Hey, you know, European leaders,

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Speaker 1: over to you. We've done everything we can. Um The

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Speaker 1: problem is the only real pressure is going to come

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Speaker 1: from the markets. And as long as you have the

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Speaker 1: ECB stepping in and buying up all kinds of assets,

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Speaker 1: that pressure is removed. So it's this endless balance between

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Speaker 1: the central bank trying to step in reduce volatility, um,

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Speaker 1: you know, improve financial stability, and then on the one hand,

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Speaker 1: and then policymakers taking that as a sign that they

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Speaker 1: don't actually have to do that their hard work um

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Speaker 1: and and going ahead and not providing any kind of

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Speaker 1: Frank can I mentioned pressure from the markets. Tenure yield

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Speaker 1: in the US is one point five five percent today.

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Speaker 1: The German tenure yield fell on the rate announcement to

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Speaker 1: negative uh nine basis points, and the Spanish tenure yield

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Speaker 1: is below. The Spanish tire yield is a basis points. Uh.

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Speaker 1: What world are we in here? This is this is

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Speaker 1: exactly the problem right with Because of all this que

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Speaker 1: then you don't have the market pressure that is maybe

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Speaker 1: needed to do more or actually to spread politicians into action. Megan,

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Speaker 1: I have a very simple question. If the ECB kept

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Speaker 1: its Stimus program unchanged, they are intimating that basically they're

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Speaker 1: not seeing immediate dangers right from the recovery to the recovery,

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Speaker 1: either because of brexits or because of low inflation. Are

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Speaker 1: we too pessimistic? I don't think so. I think there,

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Speaker 1: as I mentioned before, huge concerns about banking in Europe,

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Speaker 1: particularly Italian banks, and Italy of course is one of

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Speaker 1: the biggest countries. So if the ECB decided to go

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Speaker 1: ahead UM and not expand or extend, it's qui per

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Speaker 1: Graham to try to get markets to put pressure on policymakers.

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Speaker 1: I think that would actually just feed through into the

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Speaker 1: banks and would cause a crisis, and then either the

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Speaker 1: ECB would have to step in again um or they

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Speaker 1: would risk some kind of existential crisis UM that they've

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Speaker 1: avoided up to this point and we can expect them

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Speaker 1: to continue to avoid. But the way you deal with

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Speaker 1: the banks is basically getting rid of these bailout rules

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Speaker 1: again if I Glamrcil does. But for the e c B,

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Speaker 1: is there not something to be said that there are

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Speaker 1: less risks than there were six months ago because bregsit

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Speaker 1: happened and actually, well nothing has happened yet. Well you're

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Speaker 1: exactly right, nothing has happened yet, and so I think

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Speaker 1: there's a ton of complacency out there, particularly in the markets. UM.

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Speaker 1: But when the UK does end up triggering Article fifty UM,

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Speaker 1: I think that and when we get a better sense

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Speaker 1: of what exactly bregsit looks like, because we still have

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Speaker 1: no idea. UM, then I think the effects will be

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Speaker 1: more felt. The ECB has the single mandate of inflation.

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Speaker 1: Their target is two percent. But after all these years

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Speaker 1: of QUEI and low even negative rates from the CB,

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Speaker 1: you got no inflation. Can central banks generate inflation these days? Um?

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Speaker 1: There's only one way for central banks to do that,

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Speaker 1: and that's to boost aggregate demand in the economies. UM.

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Speaker 1: And in my mind, everything they've tried has been totally

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Speaker 1: unsuccessful in doing that. UM. I think the only chance

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Speaker 1: they really have for generating aggregate demand is helicopter money. UM.

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Speaker 1: So it's it's not even strictly monetary policy. It's some

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Speaker 1: kind of UM confliguration of monetary and fiscal policy. Now,

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Speaker 1: of course, the better option would be for governments to

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Speaker 1: step in and provide fiscal policy to stoke domestic demand. UM.

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Speaker 1: But I don't think we're going to see that, not

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Speaker 1: in the Western world and certainly not now. Like and

401
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Speaker 1: how do you defund helicopter money because there's a debout.

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Speaker 1: We don't really know what we're talking about, is it,

403
00:21:46,800 --> 00:21:49,480
Speaker 1: you know, twenty euros fifty years a hundred and fifty

404
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Speaker 1: years put through my letter box. So it could take

405
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Speaker 1: a million different forms. UM. One is just coupons or

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Speaker 1: UM deposits being put into people's bank accounts. UM. Another

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Speaker 1: is tax re bits that's more common. UM. I think

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Speaker 1: that different central banks will have to employ it differently

409
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Speaker 1: as well. In Japan, for example, UM, people have tended

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Speaker 1: to take tax rebates and stick it in the bank,

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Speaker 1: which defeats the purpose entirely. So they'll have to be

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Speaker 1: more creative about forcing people to go ahead and spend

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Speaker 1: that money. You can provide an expiration date on the

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Speaker 1: money so that people are are incentivized to go out

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Speaker 1: and spend it. But it's gonna have to look different

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Speaker 1: in different economies. UM. For the e c B, of course,

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Speaker 1: it's it's mandate covers a whole bunch of different types

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Speaker 1: of economies. Germans tend to say, for example, whereas Greeks

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Speaker 1: don't UM, So it's gonna be hard to try to

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Speaker 1: bridge that gap with one particular policy. If you we

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Speaker 1: used to have a columnist here I used to talk

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Speaker 1: about how central banks can sort of buy anything to

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Speaker 1: stimulate the economy, and she always used to use example,

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Speaker 1: they could buy Toyotas, which led me to think about

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Speaker 1: helicopter money, of Toyota's dropping out of helicopters on top

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Speaker 1: of people. But Uh, if they did something like that,

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Speaker 1: then how do they ever get out of it? Because

428
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Speaker 1: politicians would love to feed at the trough of stimulating economies.

429
00:23:04,040 --> 00:23:07,080
Speaker 1: And if it's free money, in other words, I don't

430
00:23:07,080 --> 00:23:10,120
Speaker 1: have to sell bonds to pay for it. Uh, how

431
00:23:10,119 --> 00:23:12,879
Speaker 1: do they stop that? Politicularly as somebody put it yesterday,

432
00:23:12,880 --> 00:23:16,000
Speaker 1: how do you get the helicopter to land? Well, it's tricky.

433
00:23:16,040 --> 00:23:18,119
Speaker 1: The idea is it would be a one off. And

434
00:23:18,160 --> 00:23:21,160
Speaker 1: then once you stick money into the economy and incentivize

435
00:23:21,160 --> 00:23:24,360
Speaker 1: people to spend it, there are multiplier effects and confidence effects,

436
00:23:24,359 --> 00:23:27,800
Speaker 1: and as everybody spending in businesses start investing more, um,

437
00:23:27,920 --> 00:23:31,240
Speaker 1: macroeconomic fundamentals catch up to confidence, so that it becomes

438
00:23:31,240 --> 00:23:34,320
Speaker 1: this virtuous cycle. Um. That's the ideal case, and it

439
00:23:34,320 --> 00:23:37,080
Speaker 1: certainly doesn't always work that way. So there's a chance

440
00:23:37,119 --> 00:23:38,960
Speaker 1: that if you do one helicopter drop, you'll have to

441
00:23:39,000 --> 00:23:42,479
Speaker 1: follow it on with with others. Does it work? How

442
00:23:42,520 --> 00:23:45,080
Speaker 1: do we know that helicopter money works? I mean, again,

443
00:23:45,080 --> 00:23:48,240
Speaker 1: it distorts the markets, But it's not unclear whether I

444
00:23:48,240 --> 00:23:50,080
Speaker 1: get on fifty pounds, whether I just go and spend

445
00:23:50,119 --> 00:23:53,760
Speaker 1: it or hold on to it. Yeah, and there I think, Um,

446
00:23:53,880 --> 00:23:56,439
Speaker 1: how exactly you structure it is really important. It certainly

447
00:23:56,520 --> 00:23:58,960
Speaker 1: can work. There are ways to structure helicopter money so

448
00:23:59,000 --> 00:24:01,760
Speaker 1: that it absolutely in crease's aggregate demand. If someone gives

449
00:24:01,800 --> 00:24:05,320
Speaker 1: you a hundred um pounds and says this expires tomorrow,

450
00:24:05,359 --> 00:24:07,840
Speaker 1: but you can use it for anything now, you're hard

451
00:24:07,840 --> 00:24:09,800
Speaker 1: pressed to go ahead and stick it in your pocket.

452
00:24:09,840 --> 00:24:11,440
Speaker 1: I think. So there are ways to get people to

453
00:24:11,480 --> 00:24:13,600
Speaker 1: go out and spend um. Some of them are more

454
00:24:13,600 --> 00:24:17,680
Speaker 1: extreme than others. So we send out cash and shopping

455
00:24:17,720 --> 00:24:22,119
Speaker 1: catalogs at the same time, so people are incented. Megan

456
00:24:22,119 --> 00:24:25,239
Speaker 1: Green from Manual Life Asset Management, thanks for joining us.

457
00:24:38,080 --> 00:24:40,880
Speaker 1: Now we're gonna bring in Mitrochelle with a very interesting

458
00:24:41,440 --> 00:24:45,000
Speaker 1: from PwC series regular Fender this program. They have a

459
00:24:45,119 --> 00:24:49,840
Speaker 1: very interesting study here because and timely, because of Brexit,

460
00:24:49,880 --> 00:24:51,919
Speaker 1: and because of what's going on in Europe. Uh, and

461
00:24:51,960 --> 00:24:56,240
Speaker 1: everybody talking about where business might move. The United States

462
00:24:56,320 --> 00:25:02,640
Speaker 1: is not the first choice anymore for for businesses. Mitch.

463
00:25:02,840 --> 00:25:07,160
Speaker 1: You you evaluate thirty cities around the world, and um,

464
00:25:07,400 --> 00:25:12,160
Speaker 1: we're slipping we're taking it on the chin, Michael, relative

465
00:25:12,240 --> 00:25:16,680
Speaker 1: to the rest of the world. That's correct. Now, m Francine,

466
00:25:16,800 --> 00:25:19,720
Speaker 1: I guess is located in the right place to be.

467
00:25:21,240 --> 00:25:24,480
Speaker 1: She's in London or or anywhere other than the United

468
00:25:24,480 --> 00:25:31,560
Speaker 1: States exactly. London finished first, and the obvious question everybody's

469
00:25:31,600 --> 00:25:36,400
Speaker 1: asking is what about Breggsit A little bit of full disclosure.

470
00:25:36,600 --> 00:25:39,560
Speaker 1: The principal research we did for the study took place

471
00:25:40,040 --> 00:25:43,320
Speaker 1: through the prior to but what we did was we

472
00:25:43,400 --> 00:25:46,679
Speaker 1: held off release and went and did some additional research

473
00:25:46,720 --> 00:25:50,360
Speaker 1: to see if anything would have changed. Um, there are

474
00:25:50,480 --> 00:25:54,880
Speaker 1: sixty seven attributes that we evaluate the thirty cities across.

475
00:25:55,440 --> 00:25:57,800
Speaker 1: Imagine all that data. But one of the things that's

476
00:25:57,800 --> 00:26:00,919
Speaker 1: interesting is if you look at the care touristics of

477
00:26:00,960 --> 00:26:05,240
Speaker 1: the cities that are in the across the intellectual capital, technology,

478
00:26:05,440 --> 00:26:09,840
Speaker 1: their gateway status, transportation, infrastructure and so on. Those aren't

479
00:26:09,880 --> 00:26:13,120
Speaker 1: things that change overnight at the result of a vote

480
00:26:13,480 --> 00:26:15,560
Speaker 1: or as a result of the decision of an electorate.

481
00:26:15,680 --> 00:26:20,600
Speaker 1: So UM, we felt relatively comfortable that the uh the

482
00:26:20,720 --> 00:26:24,200
Speaker 1: number one ranking of London and the study would hold

483
00:26:24,280 --> 00:26:27,879
Speaker 1: up Bregit. Howithstanding see, I'm a little bit I'm worried

484
00:26:28,119 --> 00:26:31,400
Speaker 1: because we buy a lot of French biscuits, and once

485
00:26:31,440 --> 00:26:34,080
Speaker 1: we lose access to a single market, those French biscuits

486
00:26:34,080 --> 00:26:36,360
Speaker 1: and almost everything else we buy coming from the continent

487
00:26:36,640 --> 00:26:40,840
Speaker 1: are are probably going to be more expensive. So cost

488
00:26:40,880 --> 00:26:45,720
Speaker 1: frensing is a is a factor, and economic clout is

489
00:26:45,760 --> 00:26:49,400
Speaker 1: a factor. And it's quite possible a year from now

490
00:26:49,560 --> 00:26:54,040
Speaker 1: for having this conversation and London would slip, if not considerably. Um,

491
00:26:54,359 --> 00:26:57,000
Speaker 1: but I think the bigger takeaway London the side even

492
00:26:57,000 --> 00:26:59,400
Speaker 1: if London fell two spots in our study a year

493
00:26:59,400 --> 00:27:02,159
Speaker 1: from now. The thing that was really alarming, Uh, you know,

494
00:27:02,200 --> 00:27:05,280
Speaker 1: because Michael setting in New York is why is New

495
00:27:05,359 --> 00:27:08,680
Speaker 1: York in sixth place relative to you know, five other

496
00:27:08,720 --> 00:27:11,040
Speaker 1: cities around the world that are ahead of it. Why

497
00:27:11,119 --> 00:27:13,560
Speaker 1: is New York in sixth place relative to five other

498
00:27:15,560 --> 00:27:18,360
Speaker 1: Uh you know, it's it's partially quality of life, It's

499
00:27:18,440 --> 00:27:24,440
Speaker 1: partially of cost um ease of doing business. Uh, infrastructure.

500
00:27:25,080 --> 00:27:28,600
Speaker 1: Um there you know my big observation. I'm actually on

501
00:27:28,640 --> 00:27:31,320
Speaker 1: the West coast now, other wise I would be gracing

502
00:27:31,359 --> 00:27:34,480
Speaker 1: with my presence in the studio. But the there is

503
00:27:34,520 --> 00:27:39,080
Speaker 1: no way to get from midtown Manhattan to JFK LaGuardia

504
00:27:39,160 --> 00:27:42,520
Speaker 1: by mass transit, and when you look at other cities

505
00:27:42,640 --> 00:27:45,000
Speaker 1: around the world, everybody seems to have that, and for

506
00:27:45,040 --> 00:27:48,359
Speaker 1: some reason we don't. UM. Interestingly enough, there are less

507
00:27:48,400 --> 00:27:52,280
Speaker 1: taxicabs in New York City than as a percentage of

508
00:27:52,280 --> 00:27:55,160
Speaker 1: population most other cities around the world. So it's interesting

509
00:27:55,240 --> 00:27:58,479
Speaker 1: elements of infrastructure, and then the ease of doing business,

510
00:27:58,480 --> 00:28:02,600
Speaker 1: the regulatory environment, the cost the personal tax rate in

511
00:28:02,640 --> 00:28:05,679
Speaker 1: New York as I think twenty eighth out of the

512
00:28:05,760 --> 00:28:09,159
Speaker 1: thirty cities in the survey. So those kinds of elements

513
00:28:09,359 --> 00:28:13,320
Speaker 1: UM contribute to why New York is falling behind UM,

514
00:28:13,359 --> 00:28:16,240
Speaker 1: even though it's the number two in economic cloud and

515
00:28:16,560 --> 00:28:20,640
Speaker 1: leading in you know, technology and other categories. Well, you've

516
00:28:20,640 --> 00:28:25,240
Speaker 1: got the US out of the top five, London, followed

517
00:28:25,240 --> 00:28:29,240
Speaker 1: by Singapore, Toronto, Paris, and Amsterdam. So Europe well represented. Um,

518
00:28:29,320 --> 00:28:32,239
Speaker 1: what about Asia. Singapore's the only one that seems to

519
00:28:32,240 --> 00:28:37,200
Speaker 1: get high marks, Yeah, Singapore, Hong Kong. The interesting thing

520
00:28:37,440 --> 00:28:41,280
Speaker 1: about the study, and I've been trying to sort of

521
00:28:41,280 --> 00:28:44,440
Speaker 1: wrap my brains around why, I think it's really a

522
00:28:44,560 --> 00:28:48,320
Speaker 1: question of balance. Right, So we have all of these

523
00:28:48,360 --> 00:28:52,120
Speaker 1: criteria that we evaluate the cities against, and we don't

524
00:28:52,200 --> 00:28:56,280
Speaker 1: wait them. So when you're strong in education, transit, health,

525
00:28:56,640 --> 00:29:03,280
Speaker 1: um economics, governance, and there's equal weights to how responsible

526
00:29:03,480 --> 00:29:06,520
Speaker 1: the city is for share good, whether it be um housing,

527
00:29:06,680 --> 00:29:09,959
Speaker 1: how they care for their elderly, how relocation friendly. So.

528
00:29:10,360 --> 00:29:13,440
Speaker 1: But when you think about all of those criteria, some

529
00:29:13,560 --> 00:29:17,760
Speaker 1: of the Asian cities really haven't struck that right balance

530
00:29:17,840 --> 00:29:21,800
Speaker 1: relative to European cities. Mitchchelle with p w c UH

531
00:29:22,200 --> 00:29:25,760
Speaker 1: Cities you want to do business in London, Francine Lachlau

532
00:29:25,840 --> 00:29:28,239
Speaker 1: has picked the right city, London number one, even with

533
00:29:28,400 --> 00:29:35,160
Speaker 1: the prospect of Brexit. New York slips to sixth. Thanks

534
00:29:35,160 --> 00:29:39,320
Speaker 1: for listening to the Bloomberg Surveillance podcast. Subscribe and listen

535
00:29:39,600 --> 00:29:44,960
Speaker 1: to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer.

536
00:29:45,560 --> 00:29:50,120
Speaker 1: I'm on Twitter at Tom Keane, Michael McKee is at Economy.

537
00:29:50,160 --> 00:29:53,920
Speaker 1: Before the podcast, you can always catch us worldwide. I'm

538
00:29:53,960 --> 00:30:03,600
Speaker 1: Bloomberg Radio m HM. Who you put your trust in matters.

539
00:30:04,240 --> 00:30:08,120
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540
00:30:08,120 --> 00:30:12,160
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541
00:30:12,600 --> 00:30:17,240
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