WEBVTT - Moody's Downgrade and Tariffs Impact Markets 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.639 us live on YouTube Now. 0:00:27.720 --> 0:00:31.920 An extended conversation with Edward Yard Denny. He's your Denny 0:00:32.120 --> 0:00:36.840 Research definitive CJ. Lawrence a few years ago a long 0:00:36.920 --> 0:00:41.000 tour of duty of must read at Prudential Bish Securities 0:00:41.080 --> 0:00:43.760 and has been one of the true bowls of his 0:00:43.960 --> 0:00:48.960 roaring twenties. Edgar Denny, How roaring are our roaring twenties? 0:00:50.320 --> 0:00:53.960 Well, I think things are looking better ever since April ninth, 0:00:54.000 --> 0:00:58.640 which was the postponement of the so called Liberation Day, 0:00:59.400 --> 0:01:03.560 and then of course on May twelfth there was another 0:01:03.600 --> 0:01:08.240 postponement of the tariffs on China, and so the stock 0:01:08.280 --> 0:01:11.480 markets had a v shaped recovery since then, and the 0:01:11.760 --> 0:01:16.319 stock markets had a kind of a roaring twenty correction 0:01:16.560 --> 0:01:18.920 followed by an amazing recovery. 0:01:19.080 --> 0:01:22.080 Let me translate the modesty you just heard their folks. 0:01:22.880 --> 0:01:29.279 Edgiar Denny defined bond equity currency commodity vigilantes. Edgar Denny. 0:01:29.360 --> 0:01:36.080 The vigilantes spoke, didn't they absolutely. It was on April eighth, 0:01:36.440 --> 0:01:40.000 the day before the postponement of the tariffs, so that 0:01:40.319 --> 0:01:43.720 the bond yield basically went up from four percent to 0:01:43.760 --> 0:01:46.200 four and a half percent. That got the attention to 0:01:46.240 --> 0:01:50.680 the administration. Freaked them out, actually, and even the President 0:01:50.760 --> 0:01:56.320 technology verbally said that, you know that the bond market's 0:01:56.360 --> 0:02:03.120 reaction to his policies him to postpone the tariffs. He 0:02:03.240 --> 0:02:06.400 subsequently denied that, but he said it. And it's pretty 0:02:06.400 --> 0:02:08.360 clear that he had sort of a Bill Clinton moment 0:02:09.080 --> 0:02:13.120 back in the early nineteen nineties. James Carvill and Robert 0:02:13.200 --> 0:02:16.760 Rubin warrened Clinton that he had to have fiscal discipline 0:02:17.080 --> 0:02:19.840 otherwise the bond market would come and get him. And 0:02:19.880 --> 0:02:23.600 that's exactly what happened to Donald Trump on April eighth, 0:02:23.919 --> 0:02:27.120 and then he reversed his policy or postponed his policy 0:02:27.680 --> 0:02:28.640 on April ninth. 0:02:29.520 --> 0:02:31.640 And we still have even though some of these terroriffsmen 0:02:31.760 --> 0:02:35.080 rolled back, we still have teriffts that are well in 0:02:35.160 --> 0:02:37.320 excess of kind of where we started the year here. 0:02:38.200 --> 0:02:41.680 How does that impact economic growth inflation? How do you 0:02:41.800 --> 0:02:43.840 kind of factor that in these days? 0:02:44.560 --> 0:02:49.760 Well, first and foremost, I've been observing and predicting a 0:02:49.840 --> 0:02:53.600 continuation of the economy's resilience. It's been over the past 0:02:53.639 --> 0:02:57.120 three years. We had the most widely anticipated recession of 0:02:57.200 --> 0:02:59.480 all times that never happened. It was the good Doe 0:02:59.520 --> 0:03:05.360 recession and the no show recession. And now we and 0:03:05.400 --> 0:03:10.760 that was in expectations that the Titaningo monetary policy would 0:03:10.760 --> 0:03:11.680 cause a recession. 0:03:11.760 --> 0:03:13.760 We argued that that might not be the case. 0:03:14.520 --> 0:03:18.320 And now, of course the whole tariff turmoil has got 0:03:18.360 --> 0:03:20.400 people thinking that we're going to have a recession. But 0:03:21.240 --> 0:03:23.800 those recession odds have been coming down, at least in 0:03:23.880 --> 0:03:28.440 the part of the consensus, and that's because Donald Trump. 0:03:28.520 --> 0:03:32.760 President Donald Trump has blinked several times on the terriff issue. 0:03:32.760 --> 0:03:36.040 But as you said, it's still there. It's just not 0:03:36.440 --> 0:03:40.600 as onerous as it was when it was initially announced. 0:03:41.240 --> 0:03:43.200 But it doesn't mean that we're probably going to have 0:03:43.720 --> 0:03:47.160 about of stagflation for a few months where the economy 0:03:47.520 --> 0:03:50.760 looks somewhat weaker in the summer with more inflation. 0:03:51.720 --> 0:03:54.920 So ed given that background, how do you think about 0:03:54.920 --> 0:03:59.520 this whole allocation stocks, bonds, alternatives kind of where do 0:03:59.560 --> 0:04:02.120 you see the best opportunity these days. 0:04:03.120 --> 0:04:07.160 Well, you know, I've been bullish on this market since 0:04:07.280 --> 0:04:11.240 the November of twenty twenty two, so we did call 0:04:11.320 --> 0:04:16.719 the bottom in October, and it's hard to tell people 0:04:16.760 --> 0:04:19.919 to jump on board of this speeding train right now. 0:04:20.520 --> 0:04:23.880 I would just stay invested in the stock market, and 0:04:24.320 --> 0:04:30.200 I continue to recommend avoiding information technology, communications industrials and financials. 0:04:30.760 --> 0:04:32.640 So I would stay with the stock market for sure. 0:04:33.320 --> 0:04:37.640 The ambiguity here, I think is absolutely profound. And the 0:04:37.680 --> 0:04:40.520 basic idea here is we have a global lifting yields. 0:04:40.520 --> 0:04:42.800 Whether I look at UK gilts, I look at the 0:04:43.040 --> 0:04:47.040 real uncertainties in Japan in that and what's so hard 0:04:47.680 --> 0:04:51.839 in the modern media is to understand the zeitgeist is 0:04:52.040 --> 0:04:54.440 higher yields are bad. 0:04:55.120 --> 0:05:00.600 Push against that, Well, higher yields should be, but they 0:05:00.640 --> 0:05:04.080 haven't been bad. We have seen a global bull market 0:05:04.200 --> 0:05:09.680 in stocks, even though we've seen bond yields increase. Now 0:05:09.880 --> 0:05:13.440 my view is that to a large extent, bondieals of normalized, 0:05:13.440 --> 0:05:16.240 they're back to where they should be. Twenty half percent 0:05:16.360 --> 0:05:19.680 is the right bond yield for the US economy. That 0:05:19.880 --> 0:05:22.359 was the case before the Great Financial Crisis, and I 0:05:22.360 --> 0:05:26.840 think it's the case against Now. You know, maybe we're 0:05:26.839 --> 0:05:30.599 getting some excesses in the UK, some excesses in Japan. 0:05:31.320 --> 0:05:33.599 But you know, if you want to be US centric, 0:05:33.640 --> 0:05:37.600 which to be, I think these bondials are kind of normal. 0:05:37.920 --> 0:05:40.039 But I do see a risk that there could be 0:05:40.080 --> 0:05:43.159 a mini debt crisis the way there was in twenty 0:05:43.200 --> 0:05:47.200 twenty three. In some ways, Tom, I hope there is, 0:05:47.240 --> 0:05:49.640 because I think now's a good time for a debt 0:05:49.680 --> 0:05:53.880 crisis to get the attention of the politicians in Washington, 0:05:54.360 --> 0:05:56.120 that they got to get their act together. 0:05:56.360 --> 0:05:58.680 As you'r Denny with us your DNNY research. We welcome 0:05:58.720 --> 0:06:01.120 all of you in your commute across a nation. Good morning, 0:06:01.120 --> 0:06:04.159 Bloomberg eleven three to zero in our global Wall Street. 0:06:04.200 --> 0:06:08.000 Good morning, I should say, good afternoon in England and 0:06:08.080 --> 0:06:10.760 the city and in Paris as well. Thank you so 0:06:10.880 --> 0:06:13.679 much for tuning in on all of our audio products 0:06:13.720 --> 0:06:18.159 and of course on YouTube. Subscribe to Bloomberg podcast ed 0:06:18.200 --> 0:06:20.200 Your Denny's Dog in the Couch. 0:06:20.040 --> 0:06:25.120 The Research is Subscribe to Bloomberg Max, Max you got 0:06:25.200 --> 0:06:26.400 I got a note for Max. 0:06:27.000 --> 0:06:30.360 Say the dog the dog looks stressed ed. I mean, 0:06:30.520 --> 0:06:32.839 I mean if I look at the dog, I mean 0:06:33.560 --> 0:06:37.080 the tension in the market's really really affecting Max. 0:06:37.200 --> 0:06:40.440 Right, Max really keeps me calm, He keeps me grounded. 0:06:42.720 --> 0:06:44.320 Sometimes he puts me to sleep, but. 0:06:46.360 --> 0:06:48.480 Says that about me too exactly. 0:06:48.680 --> 0:06:52.360 Hey, you mentioned that a debt crisis. I mean, I've 0:06:52.360 --> 0:06:54.160 been in this market since the mid eighties. We've been 0:06:54.200 --> 0:06:58.920 talking about deficits in the national debt and it just 0:06:59.040 --> 0:07:02.800 doesn't match. Is really important. Yeah, can you give us 0:07:02.800 --> 0:07:03.760 some context there? 0:07:04.839 --> 0:07:05.000 Yeah? 0:07:05.040 --> 0:07:05.680 Absolutely. 0:07:06.120 --> 0:07:08.440 Back in July of nineteen eighty three is when I 0:07:08.720 --> 0:07:12.600 concocted the term bond vigilantes. And I went back and 0:07:13.000 --> 0:07:15.440 read what I wrote, and I said, the bond vigilantes 0:07:15.440 --> 0:07:20.560 are particularly upset about record two hundred billion dollar deficits. 0:07:20.960 --> 0:07:22.160 And here we're looking. 0:07:21.920 --> 0:07:25.520 At two trillion dollar deficits and talking about the bond 0:07:25.600 --> 0:07:30.960 vigilantes once again. Behind me, I have a bookshelf, and 0:07:32.440 --> 0:07:34.520 on the top shelf, I've got a bunch of books 0:07:35.040 --> 0:07:40.800 from the nineteen eighties. You know, debt bomb, you know, 0:07:41.160 --> 0:07:44.880 drowning in debt, all kinds of end of the world 0:07:44.960 --> 0:07:47.760 kind of scenarios with debt. And here we are and 0:07:48.280 --> 0:07:52.080 stock market basically at an all time high. So the 0:07:52.200 --> 0:07:55.160 end of the world hasn't occurred yet, and you have 0:07:55.200 --> 0:07:58.480 some very smart people like Ray Dallio basically arguing that 0:07:58.520 --> 0:08:00.880 it's imminent that we're going to have a crisis, that 0:08:01.920 --> 0:08:04.040 we might have a buyer strike. 0:08:05.120 --> 0:08:09.480 Well, this is important. I'm taking Paul's territory here, but 0:08:09.800 --> 0:08:13.160 it's just too important. When people give you the doom 0:08:13.200 --> 0:08:16.960 and gloom, isn't that the time where you acquire shares? 0:08:17.160 --> 0:08:19.040 That's what John Templeton would say. 0:08:19.400 --> 0:08:23.520 Absolutely, It's yeah, it's when your your gut hurts and 0:08:23.560 --> 0:08:27.080 you just want to get out. Tom, I have to 0:08:27.120 --> 0:08:29.760 brag I have a really good track record at calling 0:08:29.800 --> 0:08:32.800 bottoms more so than tops. And that's because I have 0:08:32.880 --> 0:08:35.280 a relative that I don't speak to it too often 0:08:35.520 --> 0:08:38.319 that always calls me at bottoms and said, Eddie, should 0:08:38.320 --> 0:08:40.080 I get out? All of a sudden, we're best friends, 0:08:40.080 --> 0:08:45.560 you know, so uh yeah, it's uh, it's it's when 0:08:45.559 --> 0:08:49.040 you're your your uncle Max calls you up and says, 0:08:49.520 --> 0:08:51.520 you know, I know you follow the stock market? 0:08:51.559 --> 0:08:55.599 Should you get out? That makes the bottom ed? 0:08:55.640 --> 0:08:59.200 What do you make in the where investors should be 0:08:59.320 --> 0:09:02.120 positioned in the fixed income market here? Because you considered 0:09:02.120 --> 0:09:04.840 a two year treasury, you make on your four percent, 0:09:05.240 --> 0:09:06.760 or do you go out there and take some credit risk. 0:09:08.480 --> 0:09:12.360 Well, you know, it's it's kind of weird, right. Credit 0:09:12.720 --> 0:09:19.440 risk used to be high yield bonds, corporate bonds. Now 0:09:20.640 --> 0:09:25.960 suddenly we're all worrying about the thirty year treasury in Japan, 0:09:26.800 --> 0:09:29.120 the thirty year treasury in the United States. 0:09:30.000 --> 0:09:30.680 So I. 0:09:32.280 --> 0:09:36.400 Would stay I always stay short for now, but I 0:09:36.400 --> 0:09:39.679 think there could be a really great opportunity to jump 0:09:39.679 --> 0:09:42.640 back into the bond market. You know, the ten year 0:09:42.720 --> 0:09:48.280 could revisit born three quarters five percent here pretty shortly. 0:09:48.400 --> 0:09:51.959 If the bond agilantes are not pleased with what they 0:09:52.000 --> 0:09:54.760 see coming out of Washington and that, you know, if 0:09:54.760 --> 0:09:56.880 their view is the big beautiful bill is actually the 0:09:57.400 --> 0:09:59.880 big ugly bill, we'll know that pretty quickly. 0:10:00.720 --> 0:10:03.400 And one of the new areas that's been just seeing 0:10:03.480 --> 0:10:06.199 amazing growth on global Wall Street in the last I 0:10:06.200 --> 0:10:09.720 don't know fifteen years or so, has been private credit. 0:10:10.080 --> 0:10:12.480 How do you think about that when you talk to 0:10:12.520 --> 0:10:13.040 your clients. 0:10:14.559 --> 0:10:18.720 Well, I don't know. I like securities. 0:10:18.840 --> 0:10:22.920 I like to buy securities where there's a liquid market 0:10:22.960 --> 0:10:24.920 and I can get in and out and I know 0:10:24.960 --> 0:10:28.840 what these things are worth. I really don't have a 0:10:28.920 --> 0:10:31.559 problem with private credit, but I wouldn't overdo it there. 0:10:32.440 --> 0:10:34.360 I get a little suspicious when I see that the 0:10:34.400 --> 0:10:38.800 private credit industry is starting to become very democratic and 0:10:38.920 --> 0:10:42.439 create ETFs that allow them basically to unload the back 0:10:42.559 --> 0:10:45.400 stuff into ETFs. 0:10:46.280 --> 0:10:50.840 So I think they've had a good record, but I'd 0:10:50.840 --> 0:10:51.680 be careful. 0:10:51.679 --> 0:10:54.440 And just one final question here, and I think it's 0:10:54.480 --> 0:10:57.439 really really important for her. There's Center Force five hundred. 0:10:57.840 --> 0:11:02.440 How does Edgyard Denny find a select group of stocks 0:11:03.040 --> 0:11:07.240 within the standard imports five hundred to believe in? Is 0:11:07.280 --> 0:11:10.719 your method like free cash flow? Is it more economic 0:11:10.800 --> 0:11:14.120 based almost a Shiller analysis? How do you go about 0:11:14.360 --> 0:11:17.079 choosing the security for the long run? 0:11:18.200 --> 0:11:23.480 Well, first and foremost, we don't pick individual stocks on 0:11:23.600 --> 0:11:28.600 our forte so we basically tend to provide an opinion 0:11:28.679 --> 0:11:31.640 whether we think the stock market's going to continue to 0:11:31.679 --> 0:11:34.600 go up and which sectors within that are likely to 0:11:34.800 --> 0:11:36.600 per form. So I think the short answer is yes, 0:11:36.960 --> 0:11:40.720 based on the economic outlook. I started out on Wall 0:11:40.760 --> 0:11:43.880 Street as the chief economist of E. F. Hutton, and 0:11:43.920 --> 0:11:46.000 then in a few years later I became also the 0:11:46.040 --> 0:11:50.439 strategist at CJ. Lawrence, So sort of combining the two 0:11:50.559 --> 0:11:56.080 disciplines that guide my work on sectors and industries. You know, 0:11:56.120 --> 0:12:02.520 we've liked information technology, we've liked as semiiconductors, and they've 0:12:02.559 --> 0:12:05.760 been one heck of a roller coaster ride, but basically 0:12:05.800 --> 0:12:07.439 it's been improfitable. 0:12:07.559 --> 0:12:10.320 What's your SPX call here a year end or even 0:12:10.360 --> 0:12:11.720 out twelve months. 0:12:12.960 --> 0:12:15.720 Well, you know, I've been doing a lot of work 0:12:15.760 --> 0:12:19.280 on that, and i just want everybody to know that 0:12:19.320 --> 0:12:25.240 the DXY Dollar Index is very misleading index. It's a 0:12:25.280 --> 0:12:27.920 fixed weight index, it's not a trade weighted dollar, and 0:12:27.960 --> 0:12:29.920 fifty seven percent of it is the euro, So you 0:12:30.000 --> 0:12:32.559 might as well just look at the Euro dollar exchange 0:12:32.600 --> 0:12:38.439 rate when you're looking at DXY. I like the MSCI 0:12:39.679 --> 0:12:44.400 organization actually puts out a daily trade dollar which is identical, 0:12:44.440 --> 0:12:47.320 almost identical to what the Fed does. And to me, 0:12:47.480 --> 0:12:50.760 the dollar remains at an upward trend. To me, the 0:12:50.800 --> 0:12:55.640 dollars going sideways relative to develop develop the currencies. But 0:12:55.720 --> 0:12:58.960 in terms of emerging the dollar is very strong. So 0:12:59.040 --> 0:13:02.320 I'm not in this. You know, you know, end of 0:13:02.360 --> 0:13:04.119 the world scenario for the dollar. 0:13:03.960 --> 0:13:05.959 Well, give me the sand first five hundred. Are you 0:13:06.040 --> 0:13:09.080 out to seven thousand? Still? If you reaffirm that off 0:13:09.120 --> 0:13:11.120 of all the tariff news. 0:13:12.480 --> 0:13:15.000 Well, I started out the year at seven thousand, and 0:13:15.040 --> 0:13:19.079 I think strategists were generally kind of near that kind 0:13:19.120 --> 0:13:22.600 of level. Maybe I was at the high end and 0:13:22.880 --> 0:13:28.200 Trump got me. So I did lower it to sixty 0:13:29.400 --> 0:13:32.120 four hundred in our early March, and then in late 0:13:32.240 --> 0:13:34.400 March I lowered it to six thousand. 0:13:34.400 --> 0:13:36.120 We are I going to make some news today. I 0:13:36.200 --> 0:13:38.360 can you give me seven thousand here you're on a 0:13:38.440 --> 0:13:39.440 sleepy May morning. 0:13:41.400 --> 0:13:44.000 Well, I'll give you sixty five hundred, which is what 0:13:44.040 --> 0:13:47.160 I've raised it to, with the possibility of getting back 0:13:47.240 --> 0:13:50.680 up to to seven thousand, and I've told people I 0:13:50.760 --> 0:13:53.199 reserved the right to change my mind as often as 0:13:53.200 --> 0:13:53.720 the president. 0:13:54.160 --> 0:13:56.800 Max just rolled over when he heard that. Think we 0:13:56.840 --> 0:13:58.679 said good morning to Max on the couch. For those 0:13:58.720 --> 0:14:02.000 of you on Bloomberg, till the dog is come casual 0:14:02.520 --> 0:14:05.360 here on a May morning. Ed your Denny thank you 0:14:05.440 --> 0:14:08.160 so much with your Denny Research. Again, we protect the 0:14:08.200 --> 0:14:11.679 copyright of all of our guests research. Go to your 0:14:11.720 --> 0:14:16.079 Denny Research. It's a terrific value. Can't say enough about 0:14:16.080 --> 0:14:18.400 the use of it. Off your cell. 0:14:18.200 --> 0:14:27.240 Phone, you're listening to the Bloomberg surveillance podcast. Catch US 0:14:27.280 --> 0:14:30.640 live weekday afternoons from seven to ten am Eastern Listen 0:14:30.680 --> 0:14:34.240 on Applecarplay and Android Auto with the Bloomberg Business app, 0:14:34.440 --> 0:14:36.160 or watch US live on YouTube. 0:14:36.400 --> 0:14:39.880 Joining US now from Europe alder schmediaan of course with 0:14:39.920 --> 0:14:42.360 Barren bergerg wonderful to have you in our studio. Thank you. 0:14:43.280 --> 0:14:46.479 Is Brexit dead? Let's just start with that headline. 0:14:46.640 --> 0:14:50.840 No, Unfortunately, Brexit is not dead. Brexit is there to stay. We, however, 0:14:50.880 --> 0:14:53.360 are getting a little pain relief now with the UK 0:14:53.520 --> 0:14:55.560 drawing it a little closer on a few issues to 0:14:55.680 --> 0:14:58.360 the EU. Again, Brexit has been really bad for the 0:14:58.440 --> 0:15:01.120 UK economy and now the day it will be slightly 0:15:01.160 --> 0:15:02.120 slightly mitigated. 0:15:02.240 --> 0:15:07.080 Do we underestimate growth in the continent and in the 0:15:07.160 --> 0:15:11.040 United Kingdom? I keep seeing Paul six months later. Oops, yep, 0:15:11.160 --> 0:15:11.920 and up we go. 0:15:12.600 --> 0:15:15.400 I mean, all in all, a relative to the circumstances 0:15:15.400 --> 0:15:18.360 which are globally not all that good to put in, 0:15:18.640 --> 0:15:21.880 the Europe is indeed holding up. What we continue to 0:15:21.920 --> 0:15:27.320 overlook occasionally is that especially southern Europe is mostly not 0:15:27.400 --> 0:15:30.400 all of it, but mostly doing well, reaping the rewards 0:15:30.400 --> 0:15:33.720 of the harsh reforms after the Euro crisis, and that 0:15:33.840 --> 0:15:38.000 in the UK already with Rishi Sunak and then Kiel 0:15:38.120 --> 0:15:42.000 Stamer starting to reset relations with the EU, there is 0:15:42.080 --> 0:15:44.880 also a bit of a dynamic in the UK. 0:15:45.960 --> 0:15:50.560 Is the EU at all receptive to I don't know 0:15:50.960 --> 0:15:53.360 some of the UK's overtures here. If I'm the EU, 0:15:53.440 --> 0:15:56.920 I'm like, now, you guys already voted well. 0:15:57.080 --> 0:15:59.760 On the pragmatic level, the EU wants to strike the 0:16:00.080 --> 0:16:03.280 and it is striking deeds. Of course, this is the EU, 0:16:03.480 --> 0:16:06.200 the big EU relative to the smaller UK, which is 0:16:06.200 --> 0:16:09.000 about one six of the size of the EU economy. 0:16:09.080 --> 0:16:12.800 And as a result, the EU does not allow cherry picking. 0:16:13.160 --> 0:16:15.880 That is for the UK to simply say, this is 0:16:15.920 --> 0:16:17.760 the part we love, this is the part we don't 0:16:17.840 --> 0:16:20.400 like about the EU. We want to have only the cherries. 0:16:20.720 --> 0:16:24.640 But we do see pragmatic progress and in the age 0:16:24.800 --> 0:16:27.240 of Putine and also in the age of Trump, we 0:16:27.280 --> 0:16:29.560 know I have to say there is a clear Russia 0:16:29.560 --> 0:16:32.440 now for the UK and the EU to work together 0:16:32.520 --> 0:16:36.040 on the military but also easing some of the economic 0:16:36.120 --> 0:16:37.960 pains from Brexit for the UK. 0:16:38.400 --> 0:16:41.320 So we saw the plans coming out of Germany, you know, 0:16:41.600 --> 0:16:46.680 several months ago about reinvesting in their defense, in their infrastructure. 0:16:47.920 --> 0:16:51.280 That's fine for Germany. Can the rest of Europe do that? 0:16:51.920 --> 0:16:54.640 The rest of Europe does not have the physical space 0:16:54.840 --> 0:16:58.600 for that. But look at a map. Germany is much 0:16:58.720 --> 0:17:01.200 closer to Russia, to US Ukraine than most of the 0:17:01.240 --> 0:17:04.640 rest of Europe, as is Poland. As is Poland has 0:17:04.680 --> 0:17:08.840 a independently order. He raised its defense spending a lot, 0:17:08.960 --> 0:17:12.240 so have the Baltics. Germany was in a way the 0:17:12.280 --> 0:17:15.960 big missing country, the country with fiscal space not doing 0:17:16.119 --> 0:17:18.800 enough yet, and it's now clothing the gap. 0:17:19.920 --> 0:17:23.840 So is that suggests that the European accountry, like we 0:17:23.880 --> 0:17:26.560 saw a lot of investors in the first part of 0:17:26.560 --> 0:17:29.440 this year move money out of the US into Europe 0:17:29.960 --> 0:17:33.639 in stocks and bonds and currencies. Is that something you 0:17:33.640 --> 0:17:37.760 think is credible and is longer lasting? 0:17:37.800 --> 0:17:41.800 Do you think, well, there was a bit of europhoia, yeah, 0:17:42.000 --> 0:17:45.200 late February, early March, and that has passed. But that 0:17:45.359 --> 0:17:48.080 was just a little overdone. The underlying another of this 0:17:48.440 --> 0:17:52.600 is correct with Germany getting its act sort of together, 0:17:52.680 --> 0:17:55.960 not never fully, but sort of together. With Germany using 0:17:55.960 --> 0:17:59.960 its fiscal space to improve its growth prospects via infrastructure, 0:18:00.280 --> 0:18:04.320 and with Germany doing more to defend itself and basically 0:18:04.400 --> 0:18:08.119 also the rest of Europe against Putine. Europe is a 0:18:08.240 --> 0:18:11.400 more attractive place. And then you have the US problems. 0:18:11.440 --> 0:18:14.000 You have Trump that, you have tariffs, you have the 0:18:15.240 --> 0:18:19.080 distrust in US institutions, and as a result, the US 0:18:19.080 --> 0:18:21.800 looks less and Europe looks a bit more attract I don't. 0:18:21.640 --> 0:18:24.120 Care about the economics. Do you see a boom year 0:18:24.240 --> 0:18:26.840 for tourism in Europe? 0:18:27.200 --> 0:18:31.000 There's so much a word, but yes, this is one 0:18:31.040 --> 0:18:33.960 of part of the European economy which looks set to 0:18:34.000 --> 0:18:36.720 grow quite nice. It's like a big part, right, It's 0:18:36.760 --> 0:18:42.080 a significant part for Southern Europe especially, And indeed tourism 0:18:42.200 --> 0:18:45.320 looks good. Industry, of course, and a few services are 0:18:45.359 --> 0:18:49.480 still under the cloud of the Trump trade wars, but 0:18:49.600 --> 0:18:52.439 tourism is good. Welcome to Europe, I tell you it's 0:18:52.480 --> 0:18:53.960 a great place, as of course, I really. 0:18:54.320 --> 0:18:57.040 And I looked at the obligatory flight I called fifty 0:18:57.119 --> 0:18:59.840 seven fifty six, which is United out of Newark, just 0:19:00.040 --> 0:19:02.160 happens to be the flight I look at, and they're 0:19:02.200 --> 0:19:04.879 giving it away, pat are they ready? Three thousand and 0:19:05.040 --> 0:19:08.119 four dollars Holger Schmeeting Class. 0:19:07.800 --> 0:19:08.720 And you're going, yeah, you're not. 0:19:09.440 --> 0:19:13.000 We're not the It's like new low I mean, but I. 0:19:12.920 --> 0:19:16.840 Mean, Holger, We've got the Euro at one spot one 0:19:17.040 --> 0:19:18.919 two here. We're not a parody for the Euro. How 0:19:19.000 --> 0:19:23.800 high I mean? Is that reflective of the expectations for 0:19:23.880 --> 0:19:24.639 Europe in general? 0:19:26.680 --> 0:19:29.119 The Euro is still a bit undervalued if I compare 0:19:29.160 --> 0:19:32.479 it under If I compare what I say here in 0:19:32.520 --> 0:19:36.000 New York for my hotel and for my t relative 0:19:36.040 --> 0:19:38.399 to what I will pay in a major European capital, 0:19:38.880 --> 0:19:41.240 and if I compare many other prices, the euro is 0:19:41.240 --> 0:19:45.360 still modestly undervalued. We will likely go towards one twenty 0:19:47.080 --> 0:19:50.600 next year problem, and then we'll have to see if 0:19:50.760 --> 0:19:53.359 the US gets his fiscal housing order or not. If 0:19:53.400 --> 0:19:55.720 the US does not, five years from now, we might 0:19:55.760 --> 0:19:56.520 be at one fifty. 0:19:56.640 --> 0:19:58.960 A million years ago, the trade minister of France, her 0:19:59.040 --> 0:20:00.960 name was Le Guard, called me up and said you 0:20:01.040 --> 0:20:02.480 got to go to some meeting in New York and 0:20:02.520 --> 0:20:05.800 it was an innovation in technology. They were setting up 0:20:05.800 --> 0:20:10.240 a satellite out of CDG and in Paris. Okay, every 0:20:10.359 --> 0:20:14.480 article is Europe's missed the boat in technology, Halger, How 0:20:14.520 --> 0:20:20.880 do the leaders of europe initial initiate catching up in technology. 0:20:21.960 --> 0:20:26.160 We will catch up in using the new technologies we've 0:20:26.200 --> 0:20:29.480 always been good at that. The Internet wasn't quite invented 0:20:29.520 --> 0:20:32.639 in Europe, but the Internet of Things, yeah, this is 0:20:32.640 --> 0:20:35.960 where Europe is very strong. The same will likely happen 0:20:36.000 --> 0:20:40.080 with artificial intelligence. Unfortunately, partly because we don't have the 0:20:40.119 --> 0:20:43.040 capital market and the institution to scale up the many 0:20:43.080 --> 0:20:46.160 startups we have as rapidly as it happens in the US, 0:20:46.560 --> 0:20:50.200 we will not have the really, really big, immediate pioneer 0:20:50.280 --> 0:20:53.919 companies on artificial intelligence. But when it comes to using 0:20:54.080 --> 0:20:58.920 our highly qualified workforce YEAP to turn artificial intelligence into 0:20:58.960 --> 0:21:02.600 something that's good for all of us, then European companies 0:21:02.720 --> 0:21:03.640 will be there. 0:21:04.320 --> 0:21:07.400 This has been wonderful, holdersating, Thank you so much for Fairenberg. 0:21:07.680 --> 0:21:11.600 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:21:11.600 --> 0:21:14.920 starting at seven am Eastern on Applecarplay and Android Auto 0:21:15.040 --> 0:21:18.000 with the Bloomberg Business app. You can also listen live 0:21:18.080 --> 0:21:21.679 on Amazon Alexa from our flagship New York station, Just 0:21:21.720 --> 0:21:24.240 say Alexa Play Bloomberg eleven thirty. 0:21:24.680 --> 0:21:28.040 Angela Stent was my book of the Year. I made 0:21:28.040 --> 0:21:29.760 my book of the Year a couple of years ago 0:21:29.800 --> 0:21:34.280 on a February, I think Thursday. Her book is Putin's World. 0:21:34.400 --> 0:21:39.000 It is the single one biography on the makeup of 0:21:39.080 --> 0:21:42.720 Vladimir Putin. We're honored that Angela Stent could join us 0:21:43.320 --> 0:21:48.000 this morning. Angela, Chapter three of your book, Ambivalent Europeans. 0:21:48.200 --> 0:21:51.720 Is Vladimir Putin an ambivalent European? 0:21:53.400 --> 0:21:58.040 I think Vladimir Putin is by now a convinced Eurasianist, 0:21:58.480 --> 0:22:01.280 even though he speaks Germany. He lived in East Germany 0:22:01.320 --> 0:22:05.119 for five years. I think if you listen to what 0:22:05.160 --> 0:22:08.040 the Russian talk shows are saying, and what even Putin 0:22:08.119 --> 0:22:11.600 himself is saying, they're highly critical of the Europeans because 0:22:11.600 --> 0:22:14.640 they are now in a situation where the Trump administration 0:22:14.760 --> 0:22:18.679 has been able to accomplish what neither the Soviet Union 0:22:18.880 --> 0:22:22.200 or post Soviet Russia was able to do, and that's 0:22:22.240 --> 0:22:23.879 to split work from the US. 0:22:24.600 --> 0:22:28.520 Is President Trump helping or is he in the way 0:22:29.119 --> 0:22:30.879 of a constructive outcome? 0:22:32.440 --> 0:22:35.479 So I don't think he's helping at the moment, because 0:22:35.520 --> 0:22:39.040 you know, having gotten the Ukrainians and the Europeans to say, yes, 0:22:39.080 --> 0:22:42.280 we have to have a thirty day interim ceasefire before 0:22:42.280 --> 0:22:45.679 we can really negotiate. Pudin has refused to do this. 0:22:45.840 --> 0:22:49.000 Apparently in the phone call yesterday they didn't even discuss 0:22:49.720 --> 0:22:52.960 a ceasefire in two and a half hours. So that's 0:22:53.040 --> 0:22:57.520 really not helping get us anywhere nearer to stopping the 0:22:57.640 --> 0:23:02.000 killing and talking constructively about what comes afterwards. 0:23:02.040 --> 0:23:05.440 In reality, Angela, I think just by looking at history 0:23:05.480 --> 0:23:08.600 of the last one hundred years, Russia is not going anywhere. 0:23:08.600 --> 0:23:11.720 They can keep at this for as long as anybody 0:23:12.119 --> 0:23:17.400 ken is there any leverage anybody has over Russia. 0:23:17.520 --> 0:23:20.719 So you know, there is a big package of sanctions 0:23:20.720 --> 0:23:24.840 that's been prepared by bipartisan by the US Congress, Republicans 0:23:24.840 --> 0:23:29.560 and Democrats. The Treasury Department has a sanctions packet ready 0:23:29.560 --> 0:23:33.000 to go. Scott bestn't put it on President Trump's desk, 0:23:33.359 --> 0:23:36.960 But nothing's happening. They're not imposing any sanctions, and that's 0:23:37.000 --> 0:23:39.960 what Putin really wanted to avoid. And the other thing 0:23:40.000 --> 0:23:42.960