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Speaker 1: Good morning. It's Wednesday, the twentieth of December here in London.

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Speaker 1: This is the Blueberg Daybacurate podcast. I'm Caroline Hepga. Coming

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Speaker 1: up today, Colorado's top court disqualifies Donald Trump from the

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Speaker 1: state's twenty twenty four primary election ballot. We have a

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Speaker 1: special report on the giant hedge fund bets that are

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Speaker 1: giving regulators sleepless nights and homes under the hammer. Bloomberg

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Speaker 1: has crunched the numbers to find UK property prices have

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Speaker 1: fallen by double digits in real terms. Let's start with

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Speaker 1: a roundup of our top stories. Colorado's top court has

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Speaker 1: barred Donald Trump from the state's twenty twenty four presidential

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Speaker 1: primary election ballot. In an unprecedented move, The judges ruled

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Speaker 1: that the former president had engaged in insurrection and violated

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Speaker 1: the Constitution when he incited the January sixth attack on

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Speaker 1: the US Capitol. Bloomberg's Supreme Court reporter Greg Store explains

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Speaker 1: what happens now.

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Speaker 2: The Colora Supreme Court gave Trump until January the fourth.

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Speaker 2: The file of Supreme Court appeal. Its ruling will then

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Speaker 2: stay on hold until the Supreme Court resolves the case

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Speaker 2: one way or another, chances are very good the Supreme

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Speaker 2: Court will agree to take it up. You're sure ruling,

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Speaker 2: and that ruling very very likely will have nationwide impact.

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Speaker 1: Bloomberg's greg Store, reflecting there on the Colorado Supreme Courts

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Speaker 1: four to three ruling, which was based on a post

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Speaker 1: Civil War era provision of the US Constitution banning insurrectionists

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Speaker 1: from holding public office. Donald Trump says that he will

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Speaker 1: appeal the decision and his name will remain on the

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Speaker 1: presidential primary ballot until the matter is decided by the

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Speaker 1: US Supreme Court. Now, the US is considering possible military

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Speaker 1: strikes against who the rebels attacking ships in the Red Sea.

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Speaker 1: According to people familiar with the matter, the Pentagon is

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Speaker 1: preparing to offer President Biden the option of what was

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Speaker 1: described as a quote heavy response. Commercial activity in the

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Speaker 1: region has been hampered by the violence, with nine out

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Speaker 1: of ten of the largest shipping liners now re routing

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Speaker 1: their vessels, contributing to rising commodity prices. Ralph Hobbin Jansen

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Speaker 1: is the CEO of hapag Lloyd, one of the world's

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Speaker 1: largest companies container shipping companies, and he says that he

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Speaker 1: hopes that the conflict will end soon.

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Speaker 3: I would at the moment still like to think that

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Speaker 3: this is not going to last for very long, and

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Speaker 3: that made them still mean that there is going to

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Speaker 3: be a bit of a spike in fraight rates, but

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Speaker 3: hopefully not for a very long period of time.

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Speaker 1: That was Hapag Lloyd CEO Rolf Harbin Janssen. Their American allies,

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Speaker 1: including Saudi Arabia, are amongst those worried about provoking a

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Speaker 1: wider war with the Iran backed militants in Yemen. Israel's

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Speaker 1: president has told m ambassadors that the country is prepared

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Speaker 1: to agree to a second humanitarian pause in fighting in

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Speaker 1: exchange for the return of more hostages held by Hamas.

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Speaker 1: The offer comes as a UN Gaza ceasefire vote was

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Speaker 1: delayed for a second day. The previous resolution was vetoed

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Speaker 1: by America. While the UK abstained of the concerns that

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Speaker 1: the language used could embolden the militant group, yesterday, the

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Speaker 1: Prime Minister Ishisunak insisted that both sides would need to

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Speaker 1: agree to the terms.

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Speaker 4: Brass Those have to involve the release of hostages and

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Speaker 4: it's clear that the last one that we had of

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Speaker 4: these was broken because har Mass stopped really see the hostages,

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Speaker 4: including specifically women.

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Speaker 5: I don't think that was right.

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Speaker 1: Richie Sunac, referring there to the fact that about one

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Speaker 1: hundred and twenty nine of those abducted from Israel during

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Speaker 1: the deadly October seventh attack are still being held captive.

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Speaker 1: The Hamas run health ministry in Gaza says that these

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Speaker 1: subsequent war in Gaza has killed nineteen thy five hundred Palestinians.

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Speaker 1: Now let's turn our attention to corporate news. Eight traders

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Speaker 1: are behind almost half of all bets against two year

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Speaker 1: treasury futures. The tiny number of players and large, heavily

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Speaker 1: leveraged bets in the twenty six trillion dollar bond market

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Speaker 1: are earning regulatory Scrutinally, the SEC voted last week to

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Speaker 1: centrally clear US treasury trades from twenty twenty six in

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Speaker 1: a move to bring more oversight into the market, and

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Speaker 1: Britain's financial regulator is planning to overhaul the listing's rules

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Speaker 1: here in London to attract more companies to the stock market.

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Speaker 1: Bloomberg's Un Potts has more on the FCA's new plans.

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Speaker 6: The Financial Conduct Authority wants to reset the plumbing of

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Speaker 6: the UK stock markets among the key changes removing the

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Speaker 6: distinction between standard and premium listings, changing the amount of

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Speaker 6: shares needed to publicly float, and removing a requirement for

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Speaker 6: shareholder oversights of large payments. It's all about attempting to

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Speaker 6: make London more attractive to the CEOs of companies looking

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Speaker 6: to list their shares, companies like chip design giants arm.

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Speaker 7: I'm not a financial guy. I'm an engineer, so I

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Speaker 7: kind of give you just my layman's thought around that.

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Speaker 7: I think the capital markets and scale, I guess maybe

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Speaker 7: speak about the arm Our own case, very large capital market.

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Speaker 7: The access to capital is very large in New York.

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Speaker 7: I think that was one of the reasons that really

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Speaker 7: drove that.

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Speaker 6: In our case, I'm CEO Rene has his decision to

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Speaker 6: list his Cambridge based tech success story in America supercharge

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Speaker 6: the debate over London's attractiveness as a stock markets. The

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Speaker 6: FAA's new rules are an attempt to address that, even

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Speaker 6: if it comes with less oversight for shareholders in London.

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Speaker 6: I'm YOUU and pots Bloomberg Radio Now.

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Speaker 1: Calculations from Bloomberg Economics highlight the true extent of the

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Speaker 1: UK property sectors slow down. Taking inflation into account, average

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Speaker 1: house prices are no higher than they were in late

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Speaker 1: twenty fifteen. Bloomberg's Tea What Adebayo has the details.

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Speaker 8: An eleven percent drop in real terms, according to Bloomberg Reports,

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Speaker 8: that's the slump in housing value facing the British market.

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Speaker 8: Cash prices recorded by Nationwide Building Society have fallen less

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Speaker 8: than five percent since peaking in September twenty twenty two,

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Speaker 8: but the gap more than doubles when inflation is considered.

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Speaker 8: The downturn represents a change from the two thousand and

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Speaker 8: eight financial crisis, when real estate costs plummeted in monetary terms.

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Speaker 8: This time, rising prices are largely responsible for the adjustment.

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Speaker 8: Bloomberg's findings predict fees still have further to fall in

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Speaker 8: London Tea, added Baio Bloomberg Radio.

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Speaker 1: And now, in terms of the coming holiday season, it

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Speaker 1: may be coming up to that festive time of year,

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Speaker 1: but if you're working on Wall Street, don't expect Christmas

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Speaker 1: cheer to translate into a bumper. Bonus twenty twenty three

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Speaker 1: has proved to be somewhat of Annus horribilis for lenders,

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Speaker 1: with job carts, collapsing banks and a deal making drought,

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Speaker 1: all conspiring to erode those year end rewards. Bloomberg's and

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Speaker 1: Kate's has more.

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Speaker 5: The bonus pool at JP Morgan Chase will be close

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Speaker 5: to flag compared to twenty twenty two. At City Group

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Speaker 5: in the midst of its biggest restructuring in decades, the

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Speaker 5: pool will likely be a little changed, if not down slightly,

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Speaker 5: But Goldman Sex and Bank of America are looking to

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Speaker 5: sweet and payout by at least a few percentage points

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Speaker 5: for many of their traders this year, while Street's year

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Speaker 5: under awards programs are volatile as the industry cycles through

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Speaker 5: booms and bus in Washington and Kate's Bloomberg Radio.

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Speaker 1: Well I mentioned the holiday season, I wonder if you're

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Speaker 1: jetting off somewhere lovely. Best and worst airports, Well, the

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Speaker 1: best in the world is Oman's Muscat International. London's Hifo

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Speaker 1: Airport not doing so well. It is a horrible one

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Speaker 1: hundred and sixty third in this ranking that Bloomberg has

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Speaker 1: written up for you of the world's best and worst

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Speaker 1: airports for twenty twenty three. Actually, the ranking of don

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Speaker 1: on an annual basis by air Help is a massive

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Speaker 1: survey of almost sixteen thousand passengers. Most of the European

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Speaker 1: airports don't do very well at all. Japan and Brazil

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Speaker 1: are up there, and for the US only three US

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Speaker 1: airports in the top fifty, as for Parischal de Gaul

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Speaker 1: one hundred and seventy third and at JFK one hundred

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Speaker 1: and sixth in the world. Oh dear must do better.

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Speaker 1: Perhaps is the result of that story. Of course, you

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Speaker 1: can read all about it on the Bloomberg terminal. Now

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Speaker 1: to our top story. A court in Colorado says that

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Speaker 1: Donald Trump should be barred from the US presidency and

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Speaker 1: they have disqualified him from Colorado's presidential primary ballot because

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Speaker 1: of his actions inciting the attack on the US capital

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Speaker 1: on the sixth of January twenty twenty, trying to overturn

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Speaker 1: the presidential election. His campaign immediately said that he would

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Speaker 1: appeal to the Supreme Court. Joining me now to discuss this,

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Speaker 1: Bloomberg's Breaking News Managing editor Derek Wallbank. This is totally unprecedent.

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Speaker 1: Is four weeks before the first Republican nominating contest, which

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Speaker 1: takes place in Iowa. So the whole sort of process

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Speaker 1: of deciding the Republican candidate, what does the Colorado Court

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Speaker 1: decision actually say.

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Speaker 9: Well, it's a really straightforward question, but not one that

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Speaker 9: gets asked a lot. There is a provision in the

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Speaker 9: fourteenth Amendment to the US Constitution, which got put in

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Speaker 9: after the US Civil War. Essentially it says, if you

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Speaker 9: have aided in an insurrection or rebellion against the United

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Speaker 9: States and you're a former office holder, you can't hold

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Speaker 9: an office again. And that applies to elected office, that

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Speaker 9: applies to the military to judge ships, all sorts of things.

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Speaker 9: But essentially it was intended as a broad scale provision

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Speaker 9: to prevent a bunch of Confederate sympathizers from washing over

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Speaker 9: the new Union government in the eighteen sixties and seventies. Now,

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Speaker 9: that hasn't been tested too much because the US hasn't

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Speaker 9: seen too many large scale internal rebellions. Right January sixth, though,

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Speaker 9: the actions that were taken by a lot of Trump

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Speaker 9: supporters overrunning the capital, invading the House, and Senate flores

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Speaker 9: trying to prevent the certification of Joe Biden as president,

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Speaker 9: that is something that has been classed by many as

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Speaker 9: an insurrection, and were that to be the case, Donald

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Speaker 9: Trump cheerleading on protests would potentially face scrutiny under this title.

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Speaker 9: I'm using a lot of conditional phrases here because even

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Speaker 9: though there is a sort of per se dictionary definition

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Speaker 9: of what an insurrection is, there's not actually a lot

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Speaker 9: of follow on law or case law to sort of

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Speaker 9: clarify this point. What is the dictionary definition of an insurrection?

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Speaker 9: As you know, in the law, no matter what country

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Speaker 9: you're in the law, the definitions really matter here, and

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Speaker 9: there's just not a lot there. As you said, Iowa

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Speaker 9: was voting very very soon, and Colorado says he can't

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Speaker 9: be on the ballot. Well, Iowa not just says that

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Speaker 9: he can be on the ballot, but Donald Trump is

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Speaker 9: leading in primary polls with more than fifty percent support,

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Speaker 9: so very soon, in fact, in mid January. These positions

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Speaker 9: are going to be an existential conflict, and so I

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Speaker 9: would expect, and Donald Trump is already talking about appeals

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Speaker 9: up to the Supreme Court to urgently remedy the answer

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Speaker 9: to this.

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Speaker 1: Okay, so what would that process look like? You know,

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Speaker 1: how quickly can it be done because the court decision

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Speaker 1: has been stayed, you know, whilst it potentially goes to

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Speaker 1: the Supreme Court.

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Speaker 9: Yes, we are in a little bit of unprecedented territory here.

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Speaker 9: Theoretically you're talking about you could take a divergence in

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Speaker 9: state Supreme court rulings to the Supreme Court and just

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Speaker 9: say you have to be the ones to clarify this

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Speaker 9: at the end of whatever legal maneuvering there is. I

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Speaker 9: think the general expectation is that the Supreme Court will

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Speaker 9: have to make a ruling on this matter. That court

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Speaker 9: is six ' three in terms of who got appointed

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Speaker 9: Republicans to Democrats, and Trump appointed quite a few of them.

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Speaker 9: So there is a thought that the court is inherently

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Speaker 9: maybe more favored to Trump's disposition. But as to say,

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Speaker 9: this is an untested process, and there are some scholars

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Speaker 9: on the right who have said that Trump falls foul

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Speaker 9: of this. It's one of those scenarios. Even if you

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Speaker 9: sort of imagine that it's most likely that the Colorado

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Speaker 9: decision will not stand, and I think that's probably a

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Speaker 9: lot of people's gut check reaction here. This does have

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Speaker 9: such a whip of the long tail kind of impact

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Speaker 9: that it's absolutely worth paying attention to as it goes forward.

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Speaker 1: Okay, that's worth noting then and underlying meanwhile, of course, Trump,

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Speaker 1: as you say, is the Republican front runner, you know,

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Speaker 1: by a good stretch in terms of US polling. He

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Speaker 1: was then on effectively on the campaign trail and doing

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Speaker 1: another rally, and we have reported on this a number

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Speaker 1: of times. He again accused immigrants coming into the United

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Speaker 1: States of a number of things, including bringing in crime

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Speaker 1: and disease. He talked about undocumented migrants as quote, ruining

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Speaker 1: the fabric of the US, so using extreme language and

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Speaker 1: again a very anti immigrant platform for Trump currently.

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Speaker 9: That's right, and as you say, he is the front

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Speaker 9: runner and his party for the nomination. Look, I don't

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Speaker 9: think that Trump would be doing this if it weren't

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Speaker 9: perceived to be successful on his side. And indeed, he

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Speaker 9: can take lessons from any number of countries all the

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Speaker 9: way around the world on the idea that trying to

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Speaker 9: beat up on immigrants and cast people who don't have

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Speaker 9: your passport status as as somehow worse inherently, that seems

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Speaker 9: to be a trend across a lot of countries now.

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Speaker 9: Trump certainly, though, as I say, unsubtle about what he's saying,

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Speaker 9: he's saying very loudly and very clearly, and it's going

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Speaker 9: to be it's going to be something that we're going

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Speaker 9: to have to watch very closely to see whether or

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Speaker 9: not there are political consequences for that or if, as

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Speaker 9: I'm sure that he reminds us, he's going to reap

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Speaker 9: an electoral reward.

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Speaker 1: Okay, Derek, thank you so much for being with us

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Speaker 1: this morning. Blue Biggs Breaking News Managing Editor Derek Wallbank.

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Speaker 1: Then on the latest on former President Donald Trump, the campaign,

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Speaker 1: the Colorado court decision. Will have more of that throughout

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Speaker 1: the morning. Meanwhile, to a major story on the Bluemberg

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Speaker 1: terminal today. A secretive bunch of hedge fund traders dominate

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Speaker 1: the massive basis trade. This is the discrepancies in the

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Speaker 1: US treasuries market. Now they've made millions of dollars for

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Speaker 1: their companies, but they've also spooked quite a lot of

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Speaker 1: global regulators. Bliombig's finance reporter Will Shaw has been writing

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Speaker 1: about this along with a number of colleagues, and joins

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Speaker 1: me now in the radio studio. Well, really good to

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Speaker 1: have you on the program. Okay, first of all, let's

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Speaker 1: go back to basics. What is the basis trade exactly?

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Speaker 10: So it's basically a bet buy hedge funds that benefits

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Speaker 10: from the tiny gaps between treasuries and futures, and now

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Speaker 10: a core group of about ten hedge funds make bets

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Speaker 10: so big that they've become central to the buying and

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Speaker 10: selling of treasuries, which are one of the cornerstones of

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Speaker 10: financial markets.

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Speaker 9: Now.

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Speaker 10: So it's a complicated niche area, but obviously it's of

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Speaker 10: massive importance in terms of finance. So the three big

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Speaker 10: players that we looked at are Jonathan Hoffman at Exodus Point,

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Speaker 10: John Bonello at Millennium, and Jonathan Tipolas at Citadel.

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Speaker 1: Okay, now, what do regulators think about all this? You know,

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Speaker 1: because they are such large trades.

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Speaker 10: So frankly, the regulators are a little bit spooked now. Effectively,

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Speaker 10: what they're worried about is a repeat of March twenty twenty,

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Speaker 10: when the basis trade blew up so spectacularly just before

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Speaker 10: the Federal Reserve had to jump in and resuscitate the market.

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Speaker 10: Regulators are watching this very closely. Last week, the SEC,

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Speaker 10: alarmed by the scale of the borrowing that's involved, voted

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Speaker 10: in new rules that may make the trade economically less enticing.

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Speaker 10: I think it should point out at this point as well,

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Speaker 10: hedge funds don't buy that argument, as you might expect.

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Speaker 10: Citidel's Ken Griffin, for example, says that the enormous volume

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Speaker 10: of the trade means that hedge funds are in fact

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Speaker 10: making the market more efficient.

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Speaker 1: Okay, yeah, and because they borrow a great deal, they

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Speaker 1: make tiny, tiny profits. But obviously on a huge volume

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Speaker 1: of trays you borrow the money, and so it's a

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Speaker 1: big deal. How much money exactly is involved though.

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Speaker 10: The short answer a lot. The longer answer, a net

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Speaker 10: short position on treasury futures, which is effectively a fair

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Speaker 10: proxy for the wager's popularity has spiked to eight hundred

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Speaker 10: billion dollars from six hundred and fifty billion dollars as

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Speaker 10: recently as July, and that's from Bank of England data

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Speaker 10: earlier this month. Now, in terms of the money involved

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Speaker 10: with the individual traders, to take Bonello for example, his

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Speaker 10: team at Millennium generated nearly one point five billion dollars

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Speaker 10: of profit in twenty twenty. However, the team also suffered

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Speaker 10: more than one hundred million dollars in losses at one

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Speaker 10: point in the same year. So it's a roller coaster.

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Speaker 1: Yeah, absolutely, and it can be, it can be. Wow,

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Speaker 1: it's such a fascinating story. Just give us a flavor

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Speaker 1: of the main players, because it is also about the personalities,

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Speaker 1: isn't it.

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Speaker 10: Yeah, so they're very secretive, but there is information out

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Speaker 10: there about them. Hoffman was at Layman Brothers. He was

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Speaker 10: often seen at his boss's desk, peppering him with questions.

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Speaker 10: Layman in twenty fourteen claiming it owed him eighty three

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Speaker 10: million dollars in pay. Bonello began his career at Merrill

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Speaker 10: Lynch and Sales before moving on to Deutsche Bank. He's

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Speaker 10: quite gregarious. Since twenty twenty, he's bought a twenty million

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Speaker 10: dollar apartment overlooking Central Bank in New York and a

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Speaker 10: thirty four million dollar mansion in Los Angeles Tippermus. He

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Speaker 10: was a competitive wrestler at MIT and also previously a

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Speaker 10: dollar swaps trader at Goldman Sachs. So that was some

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Speaker 10: time ago.

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Speaker 1: Okay, Well, it's a really interesting piece. Have a read

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Speaker 1: of it on the Bloomberg terminal. Great reporting, very interesting

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Speaker 1: on on a story that we've covered a lot at Bloomberg,

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Speaker 1: the ups and the downs of the basis trading over

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Speaker 1: the last few years. It's got a lot of regulator's attention.

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Speaker 1: Read a Bloomberg Finance reporter Will Shaw's piece on the

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Speaker 1: terminal and thanks a lot for coming into studio and

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Speaker 1: talking to me about it.

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