WEBVTT - Surveillance: This Is The New Normal, Amoa Says 0:00:00.080 --> 0:00:12.960 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:28.360 Bloomberg dot Com, and of course on the Bloomberg Why 0:00:28.360 --> 0:00:30.560 don't you bring in her steam guests? Her children are 0:00:30.560 --> 0:00:32.800 still out there if you couldn't get home from school yesterday. 0:00:32.960 --> 0:00:35.280 Dana is great Tappy with this. Dana and Moa Jpmrkan 0:00:35.320 --> 0:00:39.320 Asset Management, Senior portfolio Manager. I won't start with the politics. 0:00:39.360 --> 0:00:41.320 I want to focus with the markets. This morning, we 0:00:41.400 --> 0:00:44.360 had a really ugly German business confidence read, not on 0:00:44.440 --> 0:00:48.120 current the current situation, but on expectations of what was 0:00:48.200 --> 0:00:52.560 about to come. The data really isn't stabilizing in Europe, Dana, 0:00:52.640 --> 0:00:54.680 what you'll read on things at the moment, I think 0:00:54.680 --> 0:00:56.760 we're almost at the point where we're moving on to 0:00:56.800 --> 0:00:59.800 the second act of this weakness in Europe. Where first 0:01:00.120 --> 0:01:02.400 first bit of weakness we saw last year was being 0:01:02.400 --> 0:01:05.839 blamed on all sorts of supply side constraints, on trade 0:01:05.840 --> 0:01:08.479 wars or what's happening in the auto sector. Now we're 0:01:08.480 --> 0:01:11.320 starting to see that spill over into the consumer side 0:01:11.400 --> 0:01:14.479 and into the demand side. So weak demand is coming 0:01:14.480 --> 0:01:17.720 through on a lot of the surveys. Additionally, we're starting 0:01:17.760 --> 0:01:20.000 to see companies saying some of the constraints that had 0:01:20.040 --> 0:01:23.040 been done the supply side that are actually fading because 0:01:23.160 --> 0:01:25.160 they just they don't see the demand too match it. 0:01:25.720 --> 0:01:28.560 So much more concerning, I'd say for the outlook for 0:01:28.600 --> 0:01:31.920 the German economy, what's the circuit breaker for this weakness? 0:01:31.959 --> 0:01:34.160 Because quite clearly many people come on this program and 0:01:34.160 --> 0:01:36.240 don't think it's the e c B. So where does 0:01:36.240 --> 0:01:39.640 the circuit breaker come from? The circuit breaker comes from 0:01:39.680 --> 0:01:42.880 the politicians. We need to see physical stimulus come in UM. 0:01:42.920 --> 0:01:46.039 That's ultimately what's going to shift the trajectory for growth. 0:01:46.400 --> 0:01:50.400 The longer discontinues, the moil start to impact potential growth UM. Now, 0:01:50.440 --> 0:01:52.720 they've been hesitant to act because they don't see the 0:01:52.760 --> 0:01:55.320 weakness in the labor market. But the minute you get 0:01:55.360 --> 0:01:58.080 an indication that the labor market is starting to slow 0:01:58.120 --> 0:02:00.640 down and we are seeing the momentum on job growth fading, 0:02:01.120 --> 0:02:03.680 then the policymakers will be forced to act. I mean, 0:02:03.680 --> 0:02:06.560 we have built Dudley this question yesterday about one trillion 0:02:06.600 --> 0:02:09.040 dollars US deficit, and what do you do with fiscal 0:02:09.120 --> 0:02:12.600 expansion the United States if you need it? What's the 0:02:12.680 --> 0:02:15.720 ability to have fiscal expansion in Europe? I haven't seen 0:02:15.720 --> 0:02:19.160 a good article yet actually laying out what the catalyst 0:02:19.280 --> 0:02:22.799 will be for individual governments to do with Madame Leguarde 0:02:22.880 --> 0:02:26.359 or Brussels wants to do. I see no evidence of it. Yeah, 0:02:26.440 --> 0:02:29.720 I think it's on a case by case basis. Unfortunately, 0:02:29.760 --> 0:02:32.040 I think the big conundrum is the countries that have 0:02:32.200 --> 0:02:36.960 some flexibility on fiscal are the ones that needed least. Germany, however, 0:02:37.080 --> 0:02:40.000 now is becoming more of an issue. They certainly have 0:02:40.160 --> 0:02:44.000 the space, um not necessarily the willingness to act decisively, 0:02:44.080 --> 0:02:47.240 but they do have space to do some significant fiscal spend. 0:02:47.880 --> 0:02:50.359 But that's just one part of Europe. What is it? 0:02:51.760 --> 0:02:57.120 It's acluding the UK, which we often do now we 0:02:57.200 --> 0:02:58.919 do do it, Yeah, we do data that now we 0:02:58.960 --> 0:03:01.560 say twenty seven plus we say twenty seven plus one. 0:03:01.880 --> 0:03:04.120 I mean, I mean the basic theme here for our listeners, 0:03:04.200 --> 0:03:06.680 and this includes those coast to coast and Bloomberg Radio, 0:03:07.320 --> 0:03:10.800 is when does this low interest rate environment end? I 0:03:10.800 --> 0:03:14.320 mean I talked to your job Norman or others at 0:03:14.400 --> 0:03:18.040 JP Morgan, and there's just like a desire to get 0:03:18.080 --> 0:03:22.639 back to normalization. What's the glide path to get back 0:03:22.680 --> 0:03:25.600 to normal? Yeah, so it depends on what normal is. 0:03:25.720 --> 0:03:27.960 I would argue, this isn't the new normal, this is 0:03:27.960 --> 0:03:30.239 the normal. So you're managing a fixed in comport for 0:03:30.280 --> 0:03:33.880 ailio assuming this issis this is the new normal where 0:03:33.919 --> 0:03:37.200 the lower bound on money tree policy has decisively shifted 0:03:37.600 --> 0:03:41.760 um and we seek we see investors starting to acknowledge that. 0:03:41.840 --> 0:03:45.080 Hence the yield grab that we've been seeing. People are 0:03:45.360 --> 0:03:48.720 actually thinking, if this environment is here for the for 0:03:48.800 --> 0:03:52.680 the medium term, and inflation expectations and rising, why should 0:03:52.720 --> 0:03:55.080 we not look to lucky meals where we can find 0:03:55.120 --> 0:03:57.720 them right now. A conversation that came up again and 0:03:57.760 --> 0:03:59.480 again and again in the last couple of days with 0:03:59.600 --> 0:04:02.560 Tom and on this program and elsewhere, was the policy 0:04:02.600 --> 0:04:05.640 response from China that we've seen so far. The central Bank, 0:04:05.880 --> 0:04:07.960 the governor speaking again in the last twenty four hours, 0:04:08.000 --> 0:04:12.520 reluctant to aggressively ease, the Finance minister speaking I believe overnight, 0:04:12.600 --> 0:04:14.880 saying that the tax cuts will be bigger than expected. 0:04:14.960 --> 0:04:18.080 The nature of the stimulus in China has changed as 0:04:18.120 --> 0:04:20.360 the character of the spill over changed as well, because 0:04:20.400 --> 0:04:22.880 we've been looking at China trying to stabilize the situation 0:04:22.920 --> 0:04:25.320 for a long time, and I haven't seen any positive 0:04:25.320 --> 0:04:28.800 footullout from that effort. No, completely agree. I think China's 0:04:28.880 --> 0:04:32.039 response has changed. They've accepted a lower growth environment. We 0:04:32.080 --> 0:04:35.159 saw those statements last week saying getting growth back about 0:04:35.240 --> 0:04:37.640 six six percent is going to be challenging for China. 0:04:37.800 --> 0:04:40.560 So there's an acceptance to accept. There's a willingness to 0:04:40.600 --> 0:04:44.480 accept lower growth at the at the at the because 0:04:44.480 --> 0:04:47.200 for them, the big issue is keeping debt levels stable, 0:04:47.400 --> 0:04:50.400 so they don't want to increase net leverage in the system. 0:04:50.440 --> 0:04:53.520 So those two things act in different ways. They are 0:04:53.600 --> 0:04:59.520 focused more on um stimulating consumption domestically rather than historical 0:04:59.680 --> 0:05:02.960 in structure spends which have boosted the external growth, and 0:05:03.000 --> 0:05:04.960 I think for now it's drips and drops for China. 0:05:05.000 --> 0:05:06.960 We're not going to get the big bazooka that we 0:05:07.040 --> 0:05:09.800 had in twenty fifteen or two thousand and eight from 0:05:09.920 --> 0:05:13.440 China unless things really really become diet from here. Dinna 0:05:13.480 --> 0:05:16.679 always loved catching up with you, Dinamo, Jpmorganescent Management Senior 0:05:16.760 --> 0:05:35.400 portfolio manager joining us here in New York. I can 0:05:35.480 --> 0:05:38.000 tell you that talks about talks are leading to more talks, 0:05:38.040 --> 0:05:42.800 the Treasury Secretary, later confirming with Fox News later later 0:05:42.839 --> 0:05:45.800 confirming with Fox News that those talks would commence on 0:05:45.839 --> 0:05:50.000 the week October seven in Washington with each Chinese Vice Premier. 0:05:50.120 --> 0:05:53.920 Marilyn Watson of Black Rock, please weigh in on this craziness. 0:05:54.000 --> 0:05:56.840 Where are we in all of this? Yeah, I mean 0:05:56.880 --> 0:05:59.479 there's a huge amount going on, obviously. I think the 0:05:59.560 --> 0:06:02.240 markets are really focusing still on the trade tensions and 0:06:02.279 --> 0:06:04.320 the talks that are going to be coming up in October. 0:06:04.800 --> 0:06:09.160 We have seen some concessions already from the Chinese in 0:06:09.279 --> 0:06:12.400 terms of as in buying more agriculture, in terms of pork, 0:06:12.640 --> 0:06:16.600 in terms of you know, sybeing, etcetera. UM, And I 0:06:16.640 --> 0:06:20.880 think to your point, it's really interesting now, especially as 0:06:20.920 --> 0:06:23.279 we have the U N Council to see all these 0:06:23.279 --> 0:06:26.000 side talks. So it's not only the trade tensions, but 0:06:26.120 --> 0:06:31.480 also any discussions around the tensions around Iran, Saudi Arabia, Brexit, 0:06:31.800 --> 0:06:33.440 you name it. I think it's all going on, and 0:06:33.440 --> 0:06:35.719 I think that's why we're seeing a bit more volatility 0:06:35.720 --> 0:06:37.880 that we are in the market. Obviously, we had the 0:06:37.920 --> 0:06:40.200 announcement in the UK this morning, we saw the spike 0:06:40.279 --> 0:06:43.040 in sterling. But I think really there are a whole 0:06:43.160 --> 0:06:46.240 range of different issues that are very politically driven that 0:06:46.279 --> 0:06:49.160 are really sort of focusing the market on them at 0:06:49.160 --> 0:06:50.640 the moment. The whole range of issues that could be 0:06:50.640 --> 0:06:52.919 addressed at the UM lace today. Just as far as 0:06:52.960 --> 0:06:54.920 the trade stories concerned, we've had a series of growth 0:06:54.960 --> 0:06:59.240 scares through this cycle. We mentioned the many times fifteen, 0:06:59.320 --> 0:07:02.880 sixteen and our eighteen coming into nine. Did the trade 0:07:02.880 --> 0:07:06.000 talks hold the keys to how long we will be 0:07:06.080 --> 0:07:09.000 going through this growth scare? Or can we come out 0:07:09.000 --> 0:07:12.080 of it because of something cow somewhere else, some kind 0:07:12.080 --> 0:07:14.920 of policy initiative that brings us out of this. Finally, 0:07:14.960 --> 0:07:16.440 how does this play out in your mind? What's your 0:07:16.480 --> 0:07:19.640 base case? Maryland? So, I think that the trade tensions 0:07:19.840 --> 0:07:23.320 are really a core component of the global growth to 0:07:23.400 --> 0:07:27.080 CHETREE going forward. We've seen that in the export data 0:07:27.160 --> 0:07:31.600 coming out of Japan, out of Korea, in Europe, we've 0:07:31.600 --> 0:07:33.760 seen we're seeing the impact that it's having on the 0:07:33.800 --> 0:07:36.600 p M eyes in the uro Zone and elsewhere, and 0:07:36.640 --> 0:07:38.280 I think it really is starting to play a key 0:07:38.400 --> 0:07:42.040 role in global growth. Then a black rock in fixed 0:07:42.080 --> 0:07:48.760 income which spread neros most advantageously for our listeners. If 0:07:48.800 --> 0:07:52.840 there's a permanence to this regime, as James Bullard would 0:07:52.920 --> 0:07:59.040 call it, where's the spread nearrowing opportunity. So at the 0:07:59.120 --> 0:08:02.680 moment in the U S we do like investment grade credit. 0:08:02.880 --> 0:08:06.600 We think in this environment where the third is gradually 0:08:06.720 --> 0:08:09.480 reducing rates, where it continues to support the growth of 0:08:09.480 --> 0:08:12.640 the economy, and then we do continue to like spread product. 0:08:12.680 --> 0:08:15.920 We also like agency nbs, etcetera. I think in the 0:08:15.920 --> 0:08:19.440 Eurozone we do see spreads tightening further in the long 0:08:19.600 --> 0:08:23.200 end of the curve. In Italy and France, we think 0:08:23.240 --> 0:08:26.120 we can see further compression there. But I think also 0:08:26.320 --> 0:08:29.080 so trade isn't the only thing, and we are seeing 0:08:29.640 --> 0:08:33.000 a ratcheting up of I guess a focus on whether 0:08:33.040 --> 0:08:35.960 we could see more fiscal stimulus in Europe, whether we 0:08:36.000 --> 0:08:39.000 can see more fiscal stimulus around the world as well 0:08:39.040 --> 0:08:41.920 as you know, a range of loosening from central banks 0:08:41.920 --> 0:08:44.000 around the world as well, so we could potentially see 0:08:44.040 --> 0:08:48.160 more in Japan, We're seeing more in China, for example. 0:08:48.240 --> 0:08:51.120 In the Eurozone, so it's not just trade, but that 0:08:51.240 --> 0:08:53.320 is one of the key components that is having an 0:08:53.320 --> 0:08:55.520 impact on global growth. I was just quickly taking a 0:08:55.520 --> 0:08:57.439 look at one of your trade and looking for that compression, 0:08:57.480 --> 0:09:00.480 that spread compression in Europe. In Italy right now, the 0:09:00.480 --> 0:09:02.800 spread over Germany on a ten year maturity is a 0:09:02.880 --> 0:09:04.960 hundred and forty one call it a hundred and forty 0:09:05.000 --> 0:09:08.319 two basis points. The tights of the q ERA are 0:09:08.360 --> 0:09:11.000 a t eight basis points, and I just wonder can 0:09:11.040 --> 0:09:13.319 we retest the tights of the q ERA the kind 0:09:13.320 --> 0:09:15.440 of levels we had back in early Is that what 0:09:15.480 --> 0:09:18.240 you're looking for Maryland? Well, so we've already seen a 0:09:18.320 --> 0:09:21.480 huge compression between Italy and Germany. We've really seen that 0:09:21.520 --> 0:09:25.360 come down quite considerably. It's hard to see in the 0:09:25.440 --> 0:09:28.440 nert term them getting back to the tights that that 0:09:28.480 --> 0:09:31.160 you mentioned with between Italy and Germany, because we do 0:09:31.240 --> 0:09:35.160 still see a lot of political risk in Italy still. 0:09:35.760 --> 0:09:39.400 They've moderated, but they haven't gone away. Um. The Eurozone 0:09:39.440 --> 0:09:42.679 as a whole is still you know, struggling, and we've 0:09:42.720 --> 0:09:45.000 seen the very the way weak data coming out of 0:09:45.000 --> 0:09:47.559 Germany and elsewhere as well. So I think the ECB 0:09:47.720 --> 0:09:50.120 is doing everything it can. They've made it very clear 0:09:50.120 --> 0:09:52.640 that we need to see more fiscal stimulus. I think 0:09:52.720 --> 0:09:55.640 really to get back to the tights in between Italy 0:09:55.640 --> 0:09:58.480 and Germany, you to see a lot more in terms 0:09:58.520 --> 0:10:04.120 of up for a formulatively politic politics, etcetera. Thank you, 0:10:04.200 --> 0:10:19.080 it's good to see it. Thank you to come to 0:10:19.080 --> 0:10:22.520 you this morning from the Bloomberg Interactive Broker studios in 0:10:22.600 --> 0:10:25.960 New York. We thank Interactive Brokers for their real commitment 0:10:26.000 --> 0:10:32.560 to our conversation and economics finance investment in Brexit, and 0:10:32.640 --> 0:10:37.400 Brexit just keeps going. That's what you want to focus on, 0:10:37.720 --> 0:10:39.960 We're gonna focus on right now. We can do that 0:10:40.000 --> 0:10:43.319 with a gentleman who's really quite informed. He's a Chataw House, 0:10:43.760 --> 0:10:46.360 which is one of the great think tanks of London. 0:10:46.400 --> 0:10:50.000 I've walked by their their austin their fancy offices. They're 0:10:50.080 --> 0:10:52.840 very British and all that. Thomas Rains is in there 0:10:52.880 --> 0:10:55.800 having tea at the appropriate hour and he joins us 0:10:55.880 --> 0:10:59.000 right now. Thomas Rain's good morning. UM. I see just 0:10:59.080 --> 0:11:01.520 one headline come out. I'm not quite sure how current 0:11:01.600 --> 0:11:04.640 it is that Jeremy Corbin at the Labor Conference will 0:11:04.640 --> 0:11:08.440 move up his speech one day. There's an immediacy of 0:11:08.520 --> 0:11:11.720 the next twenty four hours. Do you have a hint 0:11:11.960 --> 0:11:14.920 or a guestimate of what the Prime Minister will do? 0:11:15.360 --> 0:11:18.200 Worried about whether the mats will make it in Manhattan. 0:11:20.200 --> 0:11:22.280 That's a great question. Thanks for having me on. I 0:11:22.600 --> 0:11:26.319 think it's at this point probably Boris Johnson will just 0:11:26.920 --> 0:11:29.320 hold fire. What we know will happen as a result 0:11:29.360 --> 0:11:32.440 of the court judgment is that Parliament will return to 0:11:32.559 --> 0:11:37.480 sitting very shortly. So the order of prorogation to suspend 0:11:37.559 --> 0:11:41.520 Parliament was unlawful, so MPs will go back to business 0:11:41.559 --> 0:11:43.480 in the Commons. But we don't actually know what they're 0:11:43.480 --> 0:11:46.160 going to do with this extra time that they have. 0:11:46.360 --> 0:11:48.840 There are lots of calls for Boris Johnson to resign. 0:11:48.960 --> 0:11:52.520 I suspect he will resist those calls for now, but 0:11:52.559 --> 0:11:54.920 in a way what he would like and what all 0:11:54.960 --> 0:11:57.319 of the parties have said that is a general election, 0:11:57.480 --> 0:11:59.839 and the question is really about how that comes about. 0:12:00.240 --> 0:12:02.000 I mean, maybe journal figure out what to do with 0:12:02.040 --> 0:12:04.520 the tats that seems to be in London. You really 0:12:04.520 --> 0:12:07.040 want to make this about sports, aren't you. Well it 0:12:07.200 --> 0:12:10.320 is a sport. You're bringing the mets for Thomas Raines 0:12:10.400 --> 0:12:13.120 because it's okay that in Brexit it's a sport. It 0:12:13.200 --> 0:12:15.400 goes on and on, and a sport that not many 0:12:15.440 --> 0:12:18.640 people like watching at the moment. Look, Thomas, here's a 0:12:18.720 --> 0:12:21.160 question for you. The Prime Minister is quite clearly lost 0:12:21.160 --> 0:12:25.080 in Parliament, he's lost in court. Does that necessarily mean 0:12:25.200 --> 0:12:29.440 he loses in the court of public opinion. I think 0:12:29.760 --> 0:12:32.680 that's much less clear. So in some ways, and there 0:12:32.760 --> 0:12:36.360 is a theory that this court judgment isn't as bad 0:12:36.480 --> 0:12:41.120 politically for Boris Johnson as it is legally. He has 0:12:41.240 --> 0:12:44.560 tried to present the narrative that he is the one 0:12:44.920 --> 0:12:47.720 sort of true believer in Brexit who was committed to 0:12:47.720 --> 0:12:50.600 making it happen. And against him, you have a Labor Party, 0:12:50.720 --> 0:12:53.520 you have a remained Parliament, and now you have judges. 0:12:53.559 --> 0:12:56.160 So in some ways it might add to the narrative 0:12:56.280 --> 0:12:58.320 that he has to say, look, I'm the only one 0:12:58.320 --> 0:13:01.920 who can deliver this the establishment against me trying to 0:13:01.920 --> 0:13:05.600 block Brexit. Having said that, this is such a clear 0:13:05.679 --> 0:13:08.760 and damning verdict, it wasn't a judgment about Brexit, as 0:13:08.800 --> 0:13:10.560 much as he will be trying to frame it. It 0:13:10.640 --> 0:13:14.240 was a judgment about the power of the executive branch 0:13:14.320 --> 0:13:17.880 to suspend Parliament and this was a powerful assertion of 0:13:17.960 --> 0:13:20.520 the rule of law and of parliamentary sovereignty. I think 0:13:20.520 --> 0:13:23.240 it's quite difficult to spin that, but he will certainly try. 0:13:23.280 --> 0:13:25.400 He wants to try and bring back as many of 0:13:25.440 --> 0:13:29.680 those Brexit Party voters, So people who've gone towards Nigel 0:13:29.720 --> 0:13:33.360 Farage's Brexit Party and the European elections he's had sort 0:13:33.360 --> 0:13:35.720 of risen out of nowhere in the last few months 0:13:36.080 --> 0:13:37.920 and he will try as much as possible to win 0:13:38.000 --> 0:13:40.640 them back. Tom Range, your claim as the tribes you 0:13:40.720 --> 0:13:45.120 talk about the European tribes, define the Farage tribe of 0:13:45.280 --> 0:13:48.240 England and how they and I mean England and how 0:13:48.280 --> 0:13:54.360 they responded this historic moment for the nation. Well, what's 0:13:54.440 --> 0:13:56.840 what's interesting about this as a sort of subtext to it, 0:13:56.880 --> 0:14:00.760 which is that the chief sort of politic call adviser 0:14:00.920 --> 0:14:04.280 to Boris Johnson is Dominic Cummings. Now he ran the 0:14:04.400 --> 0:14:08.840 main Leave campaign, but he used to have terrible fights 0:14:08.880 --> 0:14:12.480 during the referendum campaign with Nigel Forage and his colleagues 0:14:12.520 --> 0:14:15.719 who ran a slightly different campaign which was much more 0:14:15.760 --> 0:14:18.079 focused on on immigration and other issues. And there's a 0:14:18.160 --> 0:14:20.520 real political split there and they are coming out with 0:14:20.560 --> 0:14:23.560 the knives for Dominic Cummings. Now they're called on Twitter 0:14:23.640 --> 0:14:26.440 from actually all across both the Brexit Party in the 0:14:26.440 --> 0:14:30.680 Conservative Party for Cummings to resign. They hold him responsible 0:14:30.720 --> 0:14:33.240 for this proregration strategy. So there is a sort of 0:14:33.280 --> 0:14:36.280 political split behind the scenes between those two. I think 0:14:36.280 --> 0:14:40.160 Brexit Party voters, many of whom will probably not be 0:14:40.240 --> 0:14:45.200 put off by by Johnson's condemnation by the Court. Um 0:14:45.240 --> 0:14:48.280 you know, there is a hard core of British public 0:14:48.280 --> 0:14:51.680 opinion which is disproportionately English. As you mentioned, it tends 0:14:51.680 --> 0:14:54.640 to be older voters, It tends to be people outside 0:14:54.640 --> 0:14:58.000 of the big cities who are who feel that Brexit 0:14:58.120 --> 0:15:00.720 is the most important political issue you that they face. 0:15:00.840 --> 0:15:03.440 They believe that Parliament and others are trying to block it, 0:15:03.480 --> 0:15:07.520 and I doubt that they will be too concerned in 0:15:07.640 --> 0:15:09.760 terms of their support for Brexit because of the judgment 0:15:09.800 --> 0:15:11.640 of the Court and Thomas. This is embarrassing for the 0:15:11.640 --> 0:15:14.560 Prime Minister. I imagine the front pages won't be favorable 0:15:14.560 --> 0:15:16.360 to the Prime Minister tomorrow, but I wonder if the 0:15:16.360 --> 0:15:19.560 Prime Minister ultimately ends up with what he wants. Jeremy 0:15:19.600 --> 0:15:22.600 Corbin will address his party and the membership as soon 0:15:22.640 --> 0:15:25.480 as today. When he does that, Thomas, doesn't it make 0:15:25.480 --> 0:15:27.920 it harder for him to avoid the calls for a 0:15:27.960 --> 0:15:30.960 general election. Now Parliament will come back tomorrow and I 0:15:31.000 --> 0:15:32.840 have no doubt the Prime Minister will present them with 0:15:32.920 --> 0:15:35.240 the same question, if you want me out, if you 0:15:35.280 --> 0:15:37.880 think I should resign, let's have an election. How is 0:15:37.960 --> 0:15:42.360 do they avoid that for the next six weeks with 0:15:42.520 --> 0:15:45.520 significant difficulty? I think one way to do it is 0:15:45.560 --> 0:15:48.360 that you could have a vote of no confidence in 0:15:48.400 --> 0:15:52.080 the Prime Minister and you try to install a temporary government. 0:15:52.360 --> 0:15:54.720 The real challenge here is about the expension of the 0:15:54.880 --> 0:15:58.680 Article fifty negotiations. We have this deadline of October thirty 0:15:58.720 --> 0:16:01.800 one when the UK is too to lead the European Union. 0:16:02.000 --> 0:16:04.600 Parliament is determined that that date doesn't pass in the 0:16:04.680 --> 0:16:07.560 UK leaves with no deal. So you have this clear 0:16:07.840 --> 0:16:10.760 impasse and that and basically the Labor Party and the 0:16:10.760 --> 0:16:14.240 other opposition parties don't trust Boris Dumpson not to kind 0:16:14.240 --> 0:16:17.160 of move the UK over that clific. So the real 0:16:17.240 --> 0:16:19.720 question is can they find another way around that they 0:16:19.720 --> 0:16:23.240 feel that they can guarantee the UK won't leave with 0:16:23.240 --> 0:16:25.280 without a deal. One way to do that would be 0:16:25.320 --> 0:16:28.200 to have a temporary leader in government. The real uh 0:16:28.720 --> 0:16:31.400 so you had a vote of noll the government of 0:16:31.560 --> 0:16:34.040 National Unity. But the only way I think that could 0:16:34.040 --> 0:16:38.240 happen is if Conservative members of Parliament who have had 0:16:38.840 --> 0:16:41.160 lost the whips so they've basically been expelled from their 0:16:41.160 --> 0:16:44.640 party vote for that. And it's not clear that they 0:16:44.680 --> 0:16:47.840 will now. Tam Marines. This is brilliant. It's so confusing. 0:16:47.880 --> 0:16:49.600 You and I have to have a beverage of rejoice 0:16:49.640 --> 0:16:51.840 on the second floor of rules if we're going to 0:16:51.880 --> 0:16:56.160 get through this. Forget about the complexity. Doesn't the Prime 0:16:56.160 --> 0:17:01.400 minister college general election this morning in Manhattan, fly home 0:17:01.840 --> 0:17:05.639 and call their bluff and just have an election that 0:17:05.760 --> 0:17:08.280 that well is that it's not that the thing is 0:17:08.280 --> 0:17:10.119 with the change that we had under the under the 0:17:10.160 --> 0:17:12.560 previous Camera government. It's not in the gift of the 0:17:12.600 --> 0:17:16.160 Prime minister to simply call an election. He needs parliament support. 0:17:16.280 --> 0:17:19.639 He is a very weak prime minister in Parliament. He 0:17:19.720 --> 0:17:24.119 has no majority whatsoever, and so he is not really 0:17:24.160 --> 0:17:27.159 so basically they will they could call his bluff and say, well, no, 0:17:27.240 --> 0:17:30.840 we'll wait until after the thirty post of October an election. Then, 0:17:30.960 --> 0:17:33.639 but then we still have this challenge of how do 0:17:33.680 --> 0:17:36.560 you get Boris Johnson who asked for the extension that 0:17:36.600 --> 0:17:38.520 we need, and then we might have another legal fight, 0:17:38.680 --> 0:17:42.199 jan say, frustrated, like an American son. We have a 0:17:42.240 --> 0:17:44.920 six term Parliament Act, which ultimately means you need a 0:17:44.920 --> 0:17:47.679 certain amount of empres to vote for an election, and 0:17:47.800 --> 0:17:49.800 right now the Prime Minister doesn't have enough of those 0:17:49.880 --> 0:17:53.080 MPs to get that election through unless the opposition start 0:17:53.160 --> 0:17:58.840 to come with him. Oh yeah, the whole two years, 0:17:59.000 --> 0:18:01.040 a whole two years every four years, dawning up to 0:18:01.080 --> 0:18:03.120 the next one time, as we won't go there. If 0:18:03.160 --> 0:18:06.239 we had an election today, what would that result look like? 0:18:06.280 --> 0:18:10.719 If the polls are any guide at the moment, Thomas Um, 0:18:10.760 --> 0:18:13.560 I hate to keep answering questions with with don't really know, 0:18:13.760 --> 0:18:15.879 but that nobody really knows. So at the moment, the 0:18:15.920 --> 0:18:19.480 Conservative Party are doing relatively well in the polls. Labor 0:18:19.520 --> 0:18:22.720 are doing relatively poorly. The Conservatives sort of mid thirties, 0:18:22.800 --> 0:18:25.359 Labor on mid twenties. A Liberal Democrats, which is the 0:18:25.359 --> 0:18:29.080 party most opposed to Brexit, are hot on labors here 0:18:29.480 --> 0:18:31.800 and just behind them is the Brexit Party. So we 0:18:31.880 --> 0:18:34.639 have four parties in play in a system which is 0:18:34.720 --> 0:18:36.399 used to having sort of two or two and a 0:18:36.440 --> 0:18:38.720 half parties in play. So that makes all of the 0:18:38.840 --> 0:18:42.159 kind of modeling that people normally use to predict elections 0:18:42.240 --> 0:18:44.439 very difficult to use in this circumstance. I think you 0:18:44.480 --> 0:18:47.680 could have a situation where the Conservatives end up as 0:18:47.840 --> 0:18:50.240 the largest party in the House of Commons but without 0:18:50.280 --> 0:18:54.920 a majority, and you have a labor minority government which 0:18:54.960 --> 0:18:57.840 is supported by the Liberal Democrats and the SMP, and 0:18:57.920 --> 0:19:00.440 that will lead it to and with certainly a second 0:19:00.800 --> 0:19:03.800 referendum on Brexit. Tom Rines, thank you so much for 0:19:03.840 --> 0:19:23.480 the update Confusion Ring. We'll go through the morning here 0:19:23.520 --> 0:19:26.160 and of course Prime Minister Johnson schedule to speak this 0:19:26.240 --> 0:19:29.520 evening afternoon late late as well, and then he will 0:19:29.560 --> 0:19:32.640 fly back to the United Kingdom. Right now greeting him 0:19:32.640 --> 0:19:35.760 in the United Kingdom will be the mathematician from Cambridge 0:19:36.040 --> 0:19:39.040 Whale joins us. She is with black Rock and it 0:19:39.119 --> 0:19:42.400 really works in the emerging market area and the strategy 0:19:42.720 --> 0:19:45.840 forward um to give it a Matthew tilt Wale if 0:19:45.880 --> 0:19:49.919 we could, we love having you on. Is the is 0:19:50.040 --> 0:19:54.440 e M such a value in equity and in bonds 0:19:54.960 --> 0:19:57.879 that you have to own some or do you have 0:19:58.040 --> 0:20:02.439 to own a lot? I think the start you have 0:20:02.600 --> 0:20:06.919 to own some. If you think about the percentage of 0:20:07.359 --> 0:20:13.520 emerging markets as part of the overall global benchmark for 0:20:13.840 --> 0:20:20.120 aquities is eaching towards under For fixed income, it's growing 0:20:20.160 --> 0:20:23.480 as well, and that has been accelerated by the fact 0:20:23.480 --> 0:20:28.960 that China China unctual assets across aquitism bonds are increasingly 0:20:29.280 --> 0:20:34.960 getting included as well. So this year with UH Barclay's 0:20:35.040 --> 0:20:41.720 the Bloomberg Inclusion Global at JP Morgan Benchmark Inclusion MSCI 0:20:41.880 --> 0:20:44.440 inclusion on the aquity side, we're talking about over two 0:20:44.520 --> 0:20:47.840 hundred billion dollar worth of money in motion just also 0:20:47.840 --> 0:20:52.679 the back of this benchmark inclusion events along for China 0:20:53.160 --> 0:20:56.359 and more broadly, with the emerging market coming of age 0:20:56.560 --> 0:21:00.600 and markets increasingly growing, the direction of o oh yes 0:21:00.880 --> 0:21:05.119 is its own sound and potentially more so, Wait, just 0:21:05.160 --> 0:21:07.480 give us a sense of what your global allocation is 0:21:07.600 --> 0:21:10.560 right now and what changes you may have made recently 0:21:10.600 --> 0:21:19.119 to that. Absolutely so. We have actually recently upgraded European 0:21:19.240 --> 0:21:25.520 equities from underweight to neutral and brought down our emerging 0:21:25.600 --> 0:21:32.360 market equity exposure UH from overweight to neutral as well. 0:21:32.400 --> 0:21:35.000 On a tactical basis, and I tell you why. Specifically 0:21:35.040 --> 0:21:39.359 behind our European equity upgrade, that has been very much 0:21:39.480 --> 0:21:41.879 of the back of our expectation for the easy b 0:21:42.000 --> 0:21:46.200 to surprise on the upside versus UH consensus expectation in 0:21:46.280 --> 0:21:49.040 terms of the stimulus package and how far they would go. 0:21:49.400 --> 0:21:51.320 And we have seen part of that coming through, and 0:21:51.359 --> 0:21:52.960 we think that there is more to come with the 0:21:53.000 --> 0:21:57.399 incoming president Christine regards carrying over the baton as well. 0:21:57.760 --> 0:22:02.800 UM specifically with regards to our emerging market equity bangoring 0:22:02.840 --> 0:22:05.600 from overweight to a new tool that had to do 0:22:05.800 --> 0:22:09.320 back then with the mood music in terms of trades 0:22:09.359 --> 0:22:13.119 tension between the US and China deteriorating, but now that 0:22:13.280 --> 0:22:18.320 is incrementally getting better. We're reviewing that right now as well. 0:22:18.720 --> 0:22:21.440 And so really as relates to the US market, are 0:22:21.440 --> 0:22:25.159 you expecting the feder reserve to be going to a 0:22:25.240 --> 0:22:30.440 consistent easing here or maybe just kind of wanted done here? Well, 0:22:30.720 --> 0:22:34.240 m looking at the rest of the year, another rate 0:22:34.280 --> 0:22:38.160 card is very much on the table and upcoming fat 0:22:38.240 --> 0:22:42.199 meetings our life in that In that sense, Um, we 0:22:42.400 --> 0:22:46.280 very much take comfort from the fact that UH Chairman 0:22:46.320 --> 0:22:51.639