1 00:00:09,840 --> 00:00:13,880 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm term Keene Jay Leie. 2 00:00:13,960 --> 00:00:17,560 Speaker 1: We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,240 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Really 5 00:00:28,240 --> 00:00:30,400 Speaker 1: really interesting note coming from the team over at Morgan 6 00:00:30,480 --> 00:00:32,000 Speaker 1: Stanley in the last week. I want to quote some 7 00:00:32,080 --> 00:00:34,000 Speaker 1: of it for you just to begin this segment. The 8 00:00:34,040 --> 00:00:38,479 Speaker 1: puts have expired. Has been a game of deteriorating fundamentals 9 00:00:38,560 --> 00:00:41,040 Speaker 1: versus a pivoting FED and hope for a resolution to 10 00:00:41,080 --> 00:00:44,000 Speaker 1: the US China trade uncertainties. With the Fed's first rate 11 00:00:44,000 --> 00:00:46,680 Speaker 1: cut in a decade not having the desired effect on markets, 12 00:00:46,880 --> 00:00:50,400 Speaker 1: and a trade deal looking less likely every week, these 13 00:00:50,400 --> 00:00:54,040 Speaker 1: two puts, the FED and trade deal may have expired, 14 00:00:54,400 --> 00:00:58,160 Speaker 1: leaving investors facing the potential reality there is no second 15 00:00:58,200 --> 00:01:01,720 Speaker 1: half rebound coming. Michael Wilson joins US now Morgan Stanley's 16 00:01:01,760 --> 00:01:05,360 Speaker 1: chief US equity strategist. Market's always great to get your inside. 17 00:01:05,400 --> 00:01:09,240 Speaker 1: Just explore that a little bit further for us. Yeah, thanks, guys, Uh, 18 00:01:09,520 --> 00:01:11,360 Speaker 1: I mean I think you said it right. John At 19 00:01:11,360 --> 00:01:13,560 Speaker 1: the at the outset I mean, this has been building 20 00:01:13,600 --> 00:01:16,160 Speaker 1: for a while. This is not new news to the market. 21 00:01:16,640 --> 00:01:20,399 Speaker 1: I've been a little bit perplexed why a lot of 22 00:01:20,440 --> 00:01:24,800 Speaker 1: folks have been, I guess unwilling to kind of acknowledge 23 00:01:24,800 --> 00:01:28,119 Speaker 1: the slowdown. Maybe it's just the eternal optimism around the 24 00:01:28,120 --> 00:01:30,679 Speaker 1: FED and that the Fed can always fix things. So 25 00:01:30,720 --> 00:01:34,200 Speaker 1: the feds dubbish pivot was absolutely a positive development earlier 26 00:01:34,240 --> 00:01:37,920 Speaker 1: this year. Uh. And it's interesting, you know, whenever the 27 00:01:37,920 --> 00:01:42,120 Speaker 1: FED pauses after a long rates hiking cycle, it's always 28 00:01:42,160 --> 00:01:44,800 Speaker 1: positive for markets. And we went back and looked at this, 29 00:01:44,840 --> 00:01:49,480 Speaker 1: it's usually markets go about. However, once the FED starts cutting, 30 00:01:50,160 --> 00:01:53,520 Speaker 1: it's usually negative because I think it usually means that 31 00:01:53,560 --> 00:01:55,560 Speaker 1: things are getting worse, not better. And so I think 32 00:01:55,600 --> 00:01:58,760 Speaker 1: that was just a misunderstanding by folks going into the 33 00:01:58,800 --> 00:02:01,200 Speaker 1: FED meeting that if they were to cut, I mean, sure, 34 00:02:01,200 --> 00:02:02,840 Speaker 1: maybe they could have cut fifty and maybe when it 35 00:02:02,880 --> 00:02:05,920 Speaker 1: looked to react and that the President tweeted that next 36 00:02:05,960 --> 00:02:08,560 Speaker 1: morning that obviously was negative too. But I think I 37 00:02:08,600 --> 00:02:11,880 Speaker 1: think the die was cast once they cut that. You know, 38 00:02:11,919 --> 00:02:13,400 Speaker 1: now we have to deal with the reality of the 39 00:02:13,440 --> 00:02:16,160 Speaker 1: slow down. I want to point out folks, twelve months 40 00:02:16,400 --> 00:02:21,560 Speaker 1: trailing sp negative on Mike Wilson. I want to congratulate 41 00:02:21,600 --> 00:02:24,680 Speaker 1: you on your reticence against the uber bulls. Let's frame 42 00:02:24,720 --> 00:02:28,880 Speaker 1: your reticence and equity markets. Are you in cash or 43 00:02:28,919 --> 00:02:32,880 Speaker 1: are you in a certain kind of equities. We're both. 44 00:02:32,880 --> 00:02:34,840 Speaker 1: We're both, and we actually bought a bunch of the 45 00:02:34,880 --> 00:02:38,440 Speaker 1: low you sound like Ellen, Zanner continued, you know, we're 46 00:02:38,600 --> 00:02:42,080 Speaker 1: h I mean we we've been defensively positioned since last summer. 47 00:02:42,280 --> 00:02:44,760 Speaker 1: We didn't feel the need to, you know, pivot and 48 00:02:44,760 --> 00:02:47,760 Speaker 1: get really aggressive earlier this this year. That hurt us 49 00:02:47,800 --> 00:02:50,800 Speaker 1: in the first quarter, but now it's coming home to 50 00:02:51,000 --> 00:02:54,359 Speaker 1: have been been the right moves. We've been overweight utilities 51 00:02:54,400 --> 00:02:57,799 Speaker 1: and staples for over a year. We've been overweight a 52 00:02:57,919 --> 00:03:00,240 Speaker 1: long duration since April. That's turned out to be even 53 00:03:00,280 --> 00:03:02,360 Speaker 1: better than we hoped. And we've had a bunch of cash, 54 00:03:02,520 --> 00:03:05,320 Speaker 1: so uh, you know, it's helped, and we're not we're 55 00:03:05,320 --> 00:03:08,080 Speaker 1: not totally disinvested. I mean, we have equity positions and 56 00:03:08,120 --> 00:03:11,200 Speaker 1: we have exposures. We just took it over the edge. 57 00:03:11,520 --> 00:03:13,959 Speaker 1: You know. That's it. This John, this is so important 58 00:03:13,919 --> 00:03:17,679 Speaker 1: Alo Gino, Martin Adams, and others. The idea that if 59 00:03:17,720 --> 00:03:21,920 Speaker 1: someone's cautious there in a undred percent cash is just wrong. Well, 60 00:03:22,000 --> 00:03:24,800 Speaker 1: let's pick out two with those trades, long utilities that 61 00:03:24,880 --> 00:03:29,600 Speaker 1: has performed up around about through so far, the long 62 00:03:29,720 --> 00:03:31,720 Speaker 1: end of the treasury curve that has performed really well 63 00:03:31,840 --> 00:03:36,080 Speaker 1: up around about through so far, Mike, with many people 64 00:03:36,080 --> 00:03:37,880 Speaker 1: on those trades, and listen to the program right now, 65 00:03:38,000 --> 00:03:42,920 Speaker 1: they're trying to understand what would unpin the circumstances, underpin 66 00:03:43,080 --> 00:03:46,200 Speaker 1: rather these circumstances where you rotate out of some of 67 00:03:46,200 --> 00:03:48,960 Speaker 1: those traits. What are you looking for, Mike, I mean, 68 00:03:48,960 --> 00:03:51,320 Speaker 1: that's that's the right question. We're getting closer, I mean, 69 00:03:51,560 --> 00:03:53,560 Speaker 1: as you know. I mean, we've been correcting now for 70 00:03:53,640 --> 00:03:55,760 Speaker 1: eighteen months. We'd call it a rolling bear market, a 71 00:03:55,840 --> 00:03:58,640 Speaker 1: cyplical bear market. That's frustrating to the bears because the 72 00:03:58,640 --> 00:04:01,119 Speaker 1: bottom doesn't fall out either because rates are coming down. 73 00:04:01,240 --> 00:04:04,600 Speaker 1: Evaluation is supportive, but the defensive rotation has been clear 74 00:04:04,640 --> 00:04:07,680 Speaker 1: and that's been the way to really protect your portfolios. 75 00:04:08,000 --> 00:04:10,520 Speaker 1: So the thing we got to look for now is 76 00:04:10,960 --> 00:04:13,960 Speaker 1: um we're actually waiting for, like just full acknowledgement of 77 00:04:14,000 --> 00:04:16,400 Speaker 1: a US recession. And I think we're starting to hear 78 00:04:16,440 --> 00:04:19,159 Speaker 1: that now. Finally in the rhetoric. You know, Ellen is 79 00:04:19,160 --> 00:04:22,320 Speaker 1: not calling for a recession epitter, She's definitely looking at me. 80 00:04:22,440 --> 00:04:24,359 Speaker 1: I think we're probably have been the loudest on the 81 00:04:24,400 --> 00:04:26,960 Speaker 1: street of looking for elevator risk of recession in the 82 00:04:27,080 --> 00:04:30,400 Speaker 1: US now probably or so over the next six or 83 00:04:30,400 --> 00:04:33,279 Speaker 1: twelve months. And that's you know, that's a pretty high risk. 84 00:04:33,320 --> 00:04:35,800 Speaker 1: And so the market is obviously priced a lot of this. 85 00:04:36,160 --> 00:04:38,680 Speaker 1: You know, calling a recession as it's happening is not 86 00:04:38,839 --> 00:04:40,760 Speaker 1: very helpful. You have to get in front of it. 87 00:04:40,839 --> 00:04:43,440 Speaker 1: And and we've been defensively positioned for that reason. So 88 00:04:43,480 --> 00:04:47,479 Speaker 1: what we're waiting for now is full acknowledgement by you know, 89 00:04:47,600 --> 00:04:51,480 Speaker 1: basically the mainstream, and when that happens, you'll get a 90 00:04:51,600 --> 00:04:55,440 Speaker 1: final purge of these areas that have been somewhat protected. 91 00:04:55,480 --> 00:04:58,400 Speaker 1: The two areas that have been protected is basically high 92 00:04:58,520 --> 00:05:01,400 Speaker 1: quality defensive stocks and then what we call you know, 93 00:05:01,480 --> 00:05:04,120 Speaker 1: secular gross stories because they tend to hold up the 94 00:05:04,120 --> 00:05:07,120 Speaker 1: best at the end. We know that from past grows 95 00:05:07,160 --> 00:05:12,240 Speaker 1: scares that the secular growth stocks tend to fall at 96 00:05:12,240 --> 00:05:14,839 Speaker 1: the end and the defensive stocks hold up. So we're 97 00:05:14,880 --> 00:05:16,680 Speaker 1: waiting for now, is that is that sort of the 98 00:05:16,800 --> 00:05:19,080 Speaker 1: secular growth stocks to kind of fall away. That's starting 99 00:05:19,080 --> 00:05:22,520 Speaker 1: to happen. In fact, after the FED cut, it's interesting 100 00:05:22,560 --> 00:05:26,560 Speaker 1: the secular growth stocks stocks started underperformed defensive ones again, 101 00:05:27,160 --> 00:05:29,560 Speaker 1: and so that's that's good, and we want to see 102 00:05:29,560 --> 00:05:32,440 Speaker 1: more underperformance there before we rotate out of defenses. And 103 00:05:32,440 --> 00:05:35,080 Speaker 1: the second thing is more important is that the Yoo 104 00:05:35,120 --> 00:05:37,400 Speaker 1: curve has to start to re steep, and from the 105 00:05:37,440 --> 00:05:39,320 Speaker 1: back end in particular, we want to see the long 106 00:05:39,360 --> 00:05:42,880 Speaker 1: bond or tenure start to stabilize and and see the 107 00:05:42,960 --> 00:05:45,039 Speaker 1: Yol curve start to re steep. And so that hasn't 108 00:05:45,040 --> 00:05:47,599 Speaker 1: happened yet. Sentine cloths are still under performing defenses and 109 00:05:47,680 --> 00:05:50,240 Speaker 1: secular growth is under performing defenses. So we think we 110 00:05:50,279 --> 00:05:51,719 Speaker 1: have a little bit of time, but it's going to 111 00:05:51,760 --> 00:05:53,560 Speaker 1: happen quickly. We think it could happen in the next 112 00:05:53,600 --> 00:05:57,640 Speaker 1: thirty to sixty days. Target on the SMP has reached 113 00:05:57,640 --> 00:06:00,479 Speaker 1: probably breached on the downside, and that all kind of 114 00:06:00,520 --> 00:06:03,279 Speaker 1: happened at once, So it's we're getting closer to that moment, 115 00:06:03,279 --> 00:06:05,880 Speaker 1: but we don't think it's time yet to rotate other defenses. So, Mike, 116 00:06:05,920 --> 00:06:08,560 Speaker 1: we're seeing some of this tension in treasuries, as you mentioned, 117 00:06:08,560 --> 00:06:10,480 Speaker 1: you'lds aren't rising at the long end, they're falling there 118 00:06:10,480 --> 00:06:13,440 Speaker 1: down another three basis points. Today many people focused on 119 00:06:13,480 --> 00:06:15,880 Speaker 1: what's happening in high yield. At the moment, high yield 120 00:06:15,880 --> 00:06:18,880 Speaker 1: spreads have really hold in there. But something is starting 121 00:06:18,920 --> 00:06:21,240 Speaker 1: to happen. If you just break down high yield through 122 00:06:21,279 --> 00:06:24,040 Speaker 1: the various credit ratings, say the top credit rates can 123 00:06:24,120 --> 00:06:27,640 Speaker 1: high yield double bees versus the bottom triple c's, that 124 00:06:27,760 --> 00:06:30,440 Speaker 1: spreads start into widen just a little bit. Mike, What 125 00:06:30,480 --> 00:06:33,720 Speaker 1: does that signal to you? Well, it's exactly the same 126 00:06:33,760 --> 00:06:35,920 Speaker 1: thing that's happening in the equity market. You know, one 127 00:06:35,960 --> 00:06:37,400 Speaker 1: thing that we we've talked a lot about and you 128 00:06:37,400 --> 00:06:38,960 Speaker 1: guys know this this year is that we don't think 129 00:06:38,960 --> 00:06:41,920 Speaker 1: the equity and bond markets have been that disconnected, right 130 00:06:42,000 --> 00:06:45,600 Speaker 1: that the equity markets are trading defensively, uh and and 131 00:06:45,640 --> 00:06:47,960 Speaker 1: so are so are the bond markets. So you're seeing 132 00:06:48,080 --> 00:06:52,800 Speaker 1: quality outperform just like in equities. And it's extreme because 133 00:06:53,040 --> 00:06:55,599 Speaker 1: there is there is still Tina, right, I mean they 134 00:06:55,600 --> 00:06:58,200 Speaker 1: basically people are gonna put the money somewhere so people 135 00:06:58,240 --> 00:07:02,400 Speaker 1: feel okay own high quality credit investment grade or the 136 00:07:02,480 --> 00:07:05,680 Speaker 1: highest quality high yield and I'll get rid of the 137 00:07:05,720 --> 00:07:08,480 Speaker 1: lowest quality. Is the exactly thing is happening in equities. 138 00:07:08,560 --> 00:07:28,160 Speaker 1: This has been a wonderful brief Michaelson, thank you both. 139 00:07:28,240 --> 00:07:30,640 Speaker 1: John and I yesterday said we need to speak to 140 00:07:30,680 --> 00:07:33,760 Speaker 1: a select group of people and we continue this off 141 00:07:33,760 --> 00:07:38,080 Speaker 1: of William Dudley's essay for Bloomberg Opinion. Gena Smilek writes 142 00:07:38,120 --> 00:07:40,440 Speaker 1: it up on the cover of The New York Times today, 143 00:07:40,560 --> 00:07:45,040 Speaker 1: quoting Dr Posen Leaderson Institute in his public service for 144 00:07:45,120 --> 00:07:48,720 Speaker 1: the Bank of England years ago. Adam John Farrell just 145 00:07:48,800 --> 00:07:51,120 Speaker 1: mentioned the response of the Central Bank as they look 146 00:07:51,160 --> 00:07:55,400 Speaker 1: at a dual mandate. Will this change the dialogue of 147 00:07:55,440 --> 00:07:59,600 Speaker 1: the speeches ex. Jackson, Hall of Presidents, governors and the 148 00:07:59,680 --> 00:08:04,080 Speaker 1: Vice German. I think this will tom focus everybody to 149 00:08:04,240 --> 00:08:08,280 Speaker 1: more solidarity and discipline around the message and more clearly 150 00:08:08,440 --> 00:08:13,119 Speaker 1: stating that they are only looking at the near term 151 00:08:13,200 --> 00:08:18,400 Speaker 1: of inflation and goal. I have no idea what Bill 152 00:08:18,480 --> 00:08:21,120 Speaker 1: Dudley's goal isn't. Frankly, I don't care. It just feeds 153 00:08:21,120 --> 00:08:24,680 Speaker 1: conspiracy theories and it was totally irresponsible to talk that way. 154 00:08:25,200 --> 00:08:27,320 Speaker 1: The issue of discipline is one that was going to 155 00:08:27,440 --> 00:08:29,920 Speaker 1: happen anyway. You could see what Neil Cashgari said an 156 00:08:30,000 --> 00:08:33,120 Speaker 1: NPR about independence, which was totally in line with what 157 00:08:33,200 --> 00:08:36,640 Speaker 1: everybody else was saying. You know that the FED realizes 158 00:08:36,720 --> 00:08:39,080 Speaker 1: that they have to be careful in this situation. And 159 00:08:39,200 --> 00:08:43,199 Speaker 1: careful doesn't mean respecting Trump's tweets. Careful means showing the 160 00:08:43,280 --> 00:08:46,320 Speaker 1: Congress and the American people that they don't overstep the 161 00:08:46,360 --> 00:08:48,840 Speaker 1: trust that's been given in them, and that's what they're 162 00:08:48,840 --> 00:08:51,760 Speaker 1: gonna do. The other thing is just I think JR. 163 00:08:51,800 --> 00:08:55,080 Speaker 1: Pale said it bluntly as he could in his speech 164 00:08:55,080 --> 00:08:57,600 Speaker 1: at Jackson Hole. You have to treat the trade war, 165 00:08:57,720 --> 00:09:01,640 Speaker 1: however destructive it is, just like you treat bad fiscal policy. 166 00:09:02,040 --> 00:09:05,320 Speaker 1: You cannot predict it publicly, you cannot prepare for it, 167 00:09:05,360 --> 00:09:07,720 Speaker 1: you cannot try to game it. If you're a central baker, 168 00:09:07,960 --> 00:09:10,520 Speaker 1: you just have to react to it and then be 169 00:09:10,600 --> 00:09:12,719 Speaker 1: honest about what the reaction is. And I think that's 170 00:09:12,760 --> 00:09:14,800 Speaker 1: exactly what the FEDS are going to do. I remember 171 00:09:14,840 --> 00:09:17,160 Speaker 1: hearing a great story about the former governor Irvin King, 172 00:09:17,720 --> 00:09:20,760 Speaker 1: and he told policymakers on the FIC NPC that if 173 00:09:20,800 --> 00:09:22,880 Speaker 1: you're going to go out there and say that you 174 00:09:22,920 --> 00:09:24,960 Speaker 1: didn't vote for que that you don't like Hui. The 175 00:09:25,000 --> 00:09:26,640 Speaker 1: one thing I don't want you to do is say 176 00:09:26,640 --> 00:09:29,319 Speaker 1: that QUI does not work. You can say whatever else 177 00:09:29,400 --> 00:09:31,199 Speaker 1: you want to say, but you are not allowed to 178 00:09:31,240 --> 00:09:33,080 Speaker 1: say that QUI doesn't work. And Adam, I just wonder 179 00:09:33,080 --> 00:09:34,960 Speaker 1: if you can touch on your experience over at the 180 00:09:34,960 --> 00:09:38,720 Speaker 1: Bank of England many years ago, your experience for that matter, 181 00:09:38,760 --> 00:09:41,400 Speaker 1: with Mervyn King as well, how you got behind one 182 00:09:41,480 --> 00:09:44,560 Speaker 1: message even when there was disagreement about the policy. Just 183 00:09:44,600 --> 00:09:47,679 Speaker 1: how does that work internally? Adam, Well, I think there 184 00:09:47,679 --> 00:09:50,440 Speaker 1: were two instances that were relevant, Jonathan. I mean, one 185 00:09:50,480 --> 00:09:52,880 Speaker 1: was as you said, and it wasn't that Irvin King 186 00:09:52,920 --> 00:09:55,440 Speaker 1: could say, the governor could say you're not allowed. It 187 00:09:55,600 --> 00:09:58,640 Speaker 1: was of course rightly made the case that this would 188 00:09:58,720 --> 00:10:01,800 Speaker 1: just be destructive of if you were not on board 189 00:10:01,800 --> 00:10:04,600 Speaker 1: with que then you could basically leave. He didn't have 190 00:10:04,720 --> 00:10:06,280 Speaker 1: to say that. But I think that was the right 191 00:10:06,320 --> 00:10:08,920 Speaker 1: message and we all said, you know, this is a 192 00:10:08,920 --> 00:10:11,840 Speaker 1: true crisis and this is something that is legitimate for 193 00:10:11,880 --> 00:10:13,760 Speaker 1: the Central Bank to do, so we're going to all 194 00:10:13,800 --> 00:10:17,040 Speaker 1: stand by it and we're not going to feed destructive chatter. 195 00:10:17,520 --> 00:10:20,080 Speaker 1: But the other instance was some people on the NPC 196 00:10:20,720 --> 00:10:25,240 Speaker 1: came out in May April and May of talking about 197 00:10:25,320 --> 00:10:28,080 Speaker 1: physical policy, talking about the need for austerity. It was 198 00:10:28,120 --> 00:10:31,040 Speaker 1: part of the panic around Greece at that time. Then 199 00:10:31,120 --> 00:10:34,680 Speaker 1: a lot of countries shifted to austerity mistakenly. And I 200 00:10:34,720 --> 00:10:37,400 Speaker 1: was against the Bank talking that way because it was 201 00:10:37,520 --> 00:10:40,120 Speaker 1: right on top of the UK election. And I was 202 00:10:40,160 --> 00:10:43,120 Speaker 1: against the Bank talking that way because they have no 203 00:10:43,240 --> 00:10:47,000 Speaker 1: business lecturing fiscal policy, especially ahead of the election. You 204 00:10:47,120 --> 00:10:49,120 Speaker 1: just have to take it as it comes. And the 205 00:10:49,160 --> 00:10:54,360 Speaker 1: bank had suffered as a result of moves. Adam posted 206 00:10:54,480 --> 00:10:56,800 Speaker 1: with this folks at Peterson Institute where thrilled he could 207 00:10:56,800 --> 00:10:58,960 Speaker 1: be with us today. Adam, none of this is in 208 00:10:59,000 --> 00:11:01,560 Speaker 1: the text books. What were is a textbook? You add, Adam, 209 00:11:01,760 --> 00:11:04,920 Speaker 1: freshman year Economics. You're a wonder child. I know you 210 00:11:04,960 --> 00:11:07,520 Speaker 1: went through college in twenty four months. But what was it. 211 00:11:07,679 --> 00:11:11,640 Speaker 1: What was the first com book you had in school? Uh? 212 00:11:11,760 --> 00:11:15,760 Speaker 1: The first one I remember was dorn Bush and Fisher Macrow. Okay, 213 00:11:15,760 --> 00:11:18,439 Speaker 1: so you got you got Dornbush Fisher Stars, which I've 214 00:11:18,480 --> 00:11:21,559 Speaker 1: read I think cover to cover twice, Stanley Fisher's classic 215 00:11:21,600 --> 00:11:25,760 Speaker 1: book with Dornbush. Great is any of this in Dornbush 216 00:11:25,800 --> 00:11:30,319 Speaker 1: Fisher Stars? No? But it is in the third year course. 217 00:11:30,400 --> 00:11:34,680 Speaker 1: It's actually pretty straightforward, Tom that we know economists know 218 00:11:34,880 --> 00:11:38,400 Speaker 1: one big lesson from development, which is what they call institutions. 219 00:11:38,760 --> 00:11:41,480 Speaker 1: If you roade you of law, if you rode rule 220 00:11:41,520 --> 00:11:44,000 Speaker 1: of law, if you have a government that's capricious and 221 00:11:44,040 --> 00:11:46,520 Speaker 1: deterring investment, if you have a government that tries to 222 00:11:46,559 --> 00:11:51,120 Speaker 1: politicized decisions beyond simplice stating its values, you end up 223 00:11:51,160 --> 00:11:53,120 Speaker 1: with a flight of investment, you end up with a 224 00:11:53,160 --> 00:11:56,880 Speaker 1: flight to safety, you end up with bad results. And 225 00:11:56,920 --> 00:11:59,560 Speaker 1: that's what we're seeing. And that's the one Dudley has 226 00:11:59,679 --> 00:12:04,280 Speaker 1: right that the Trump administration's approach is hurting institutions. But 227 00:12:04,320 --> 00:12:08,000 Speaker 1: it's the same saying about the military, about the here, 228 00:12:08,160 --> 00:12:09,719 Speaker 1: we're gonna run out of there. We got like eight 229 00:12:09,760 --> 00:12:11,560 Speaker 1: things to talk about, Adam Pose, and let's do a 230 00:12:11,600 --> 00:12:25,000 Speaker 1: three hour conversation next time, Dr Posing with the Peterson Institute. 231 00:12:28,840 --> 00:12:31,960 Speaker 1: We welcome a woman who just heard her voice on radio, 232 00:12:32,080 --> 00:12:34,800 Speaker 1: Tara la Chapelle. What is it like hearing your voice 233 00:12:34,840 --> 00:12:36,960 Speaker 1: like in real time on radio like that. You're like, 234 00:12:37,040 --> 00:12:40,959 Speaker 1: oh MG, yeah, it makes me cringe a little. Imagine 235 00:12:41,000 --> 00:12:44,520 Speaker 1: with this voice what it's like. It's really strange. Isn't 236 00:12:44,559 --> 00:12:47,040 Speaker 1: it is. It's very weird. It's like, really, you're over 237 00:12:47,080 --> 00:12:48,920 Speaker 1: there square and I'm like, why am I? Why are 238 00:12:48,920 --> 00:12:51,680 Speaker 1: they doing this? Team? So we just heard from Tera 239 00:12:51,559 --> 00:12:54,960 Speaker 1: Les Chapelle on m O and Altria and you know, 240 00:12:54,960 --> 00:12:57,040 Speaker 1: I got like eight ways to go here, folks. Let 241 00:12:57,080 --> 00:13:00,480 Speaker 1: us start with profitability on an Eva da Bay. They 242 00:13:00,520 --> 00:13:05,440 Speaker 1: still are hugely profitable on no revenue growth. Is that 243 00:13:05,559 --> 00:13:08,719 Speaker 1: all that bad of a thing? Um? No? But I 244 00:13:08,760 --> 00:13:10,640 Speaker 1: think if you start to look down the into the 245 00:13:10,679 --> 00:13:14,280 Speaker 1: future and look at the smoking prevalence trends, I mean 246 00:13:14,280 --> 00:13:16,439 Speaker 1: they're going down in most parts of the world, especially 247 00:13:16,480 --> 00:13:18,560 Speaker 1: in the US. So I think it's coming to a 248 00:13:18,559 --> 00:13:21,600 Speaker 1: point that yes, they're very profitable. Austria throws off a 249 00:13:21,640 --> 00:13:25,360 Speaker 1: ton of cash. But I think now these newer products, 250 00:13:25,360 --> 00:13:27,839 Speaker 1: even though they're not really contributing much to revenue or 251 00:13:27,880 --> 00:13:31,200 Speaker 1: profit yet, that's the future and that's where this business 252 00:13:31,280 --> 00:13:34,000 Speaker 1: is headed. You've got a great chart showing that the 253 00:13:34,040 --> 00:13:36,520 Speaker 1: glide path it's not a log basis, but the glide 254 00:13:36,520 --> 00:13:39,960 Speaker 1: path on US consumption of tobacco, I'll say, is a 255 00:13:40,320 --> 00:13:44,080 Speaker 1: smoking prevalence is you know, like we'd expect, But even 256 00:13:44,160 --> 00:13:48,240 Speaker 1: globally it's getting is it does the globe catch up 257 00:13:48,360 --> 00:13:51,079 Speaker 1: the America? Is that sort of the belief of health 258 00:13:51,080 --> 00:13:54,560 Speaker 1: officials Maybe eventually. I mean some parts of Europe and 259 00:13:54,600 --> 00:13:57,480 Speaker 1: other parts of Africa are still in growth mode, I believe, 260 00:13:57,559 --> 00:13:59,920 Speaker 1: But when you look at the bigger picture, I think 261 00:14:00,040 --> 00:14:02,760 Speaker 1: overall it's going down and it's becoming less about cigarettes, 262 00:14:02,800 --> 00:14:05,240 Speaker 1: which is why Aultrey and Philip Morris they really don't 263 00:14:05,280 --> 00:14:07,319 Speaker 1: even talk about cigarettes that much anymore, even though it 264 00:14:07,360 --> 00:14:09,520 Speaker 1: drives most of their profits. They don't identify with that. 265 00:14:09,760 --> 00:14:11,360 Speaker 1: They don't want that to be part of their image. 266 00:14:11,360 --> 00:14:13,280 Speaker 1: They want to be seen as a growth company, something 267 00:14:13,320 --> 00:14:18,240 Speaker 1: that's you know, into these newer, hotter products like very vaping, 268 00:14:18,360 --> 00:14:24,760 Speaker 1: all this coronouncing their you're not is not a camel 269 00:14:25,160 --> 00:14:28,560 Speaker 1: no filter right right, It's not a combustible cigarette. It's 270 00:14:28,600 --> 00:14:31,600 Speaker 1: a device that heats tobacco so it doesn't burn it. 271 00:14:31,640 --> 00:14:33,680 Speaker 1: There's no real smoke that comes off. It's a different 272 00:14:33,680 --> 00:14:38,080 Speaker 1: way of getting nicotine and it Philip Morris and Altria 273 00:14:38,200 --> 00:14:41,680 Speaker 1: partnered on this. So Philip, no, I haven't now I've 274 00:14:41,680 --> 00:14:44,040 Speaker 1: seen them though, I mean they're they're becoming very popular. 275 00:14:44,360 --> 00:14:46,480 Speaker 1: Smoke come out or you know, can I look like 276 00:14:46,600 --> 00:14:48,680 Speaker 1: Katherine hepburn in one of those movies. Yeah, I mean 277 00:14:48,680 --> 00:14:50,560 Speaker 1: you see something coming out, but it doesn't look like 278 00:14:50,600 --> 00:14:54,080 Speaker 1: a cigarette burning. It's it's just like a plastic device. Basically, 279 00:14:54,200 --> 00:14:57,200 Speaker 1: it's just the working. Because I you know, I feel like, 280 00:14:57,360 --> 00:15:00,360 Speaker 1: you know, I'm out of touch on this, but can 281 00:15:00,400 --> 00:15:04,120 Speaker 1: you tell me there's actually a transference from a palm 282 00:15:04,160 --> 00:15:07,560 Speaker 1: all or you know, the days of Madmen a lark 283 00:15:07,880 --> 00:15:09,920 Speaker 1: over to what we're looking at now with these quote 284 00:15:10,000 --> 00:15:13,320 Speaker 1: unquote devices. Well, Philip Morris had an interesting line in 285 00:15:13,360 --> 00:15:16,680 Speaker 1: their last running statement last month. They said Icast delivers 286 00:15:16,760 --> 00:15:20,480 Speaker 1: nicotine and levels close to combustible cigarettes, suggesting a likelihood 287 00:15:20,480 --> 00:15:23,680 Speaker 1: that I Coast users may be able to completely transition 288 00:15:23,720 --> 00:15:27,160 Speaker 1: away from traditional cigarettes and use this exclusively. And it's 289 00:15:27,200 --> 00:15:30,080 Speaker 1: really gaining traction in Japan and parts of Europe where 290 00:15:30,080 --> 00:15:32,520 Speaker 1: they've launched so far. Next month it will launch in 291 00:15:32,560 --> 00:15:34,760 Speaker 1: the US, starting in stores in Atlanta. How is that 292 00:15:34,840 --> 00:15:37,880 Speaker 1: different from vaping? Help them? So vaping, it's just a 293 00:15:37,960 --> 00:15:40,240 Speaker 1: it's a little bit different. So east cigarettes are a 294 00:15:40,240 --> 00:15:42,040 Speaker 1: form of vaping, and that's what we think of when 295 00:15:42,080 --> 00:15:44,560 Speaker 1: we think of Jewel, which is the time cigarette, and 296 00:15:44,560 --> 00:15:47,920 Speaker 1: it's very controversial. So it's it's made with US chemicals 297 00:15:47,960 --> 00:15:50,600 Speaker 1: and vapor and it still delivers nicotins. You're talking about 298 00:15:50,680 --> 00:15:53,960 Speaker 1: reported serious illness, even death. Yes, there is a death 299 00:15:54,040 --> 00:15:56,600 Speaker 1: just last week that for the first time, medical officials 300 00:15:56,800 --> 00:16:00,680 Speaker 1: are starting equivalent or is it? Is it like worse 301 00:16:00,760 --> 00:16:03,760 Speaker 1: than you know, the tragedy of cancer and cigarettes and 302 00:16:03,760 --> 00:16:05,840 Speaker 1: all that. I mean, no one knows yet. There hasn't 303 00:16:05,880 --> 00:16:08,080 Speaker 1: been enough research. We just don't know. But I think 304 00:16:08,120 --> 00:16:10,880 Speaker 1: the concern is starting to come, and especially since jewel 305 00:16:11,320 --> 00:16:13,240 Speaker 1: is very attractive to teens. They used to have all 306 00:16:13,240 --> 00:16:15,840 Speaker 1: these flavors, so I think the government is trying to 307 00:16:15,840 --> 00:16:19,080 Speaker 1: crack down on that because it's the co stop they 308 00:16:19,080 --> 00:16:22,040 Speaker 1: did close cigarettes. I mean remember close cigarettes. You'd hang 309 00:16:22,040 --> 00:16:24,640 Speaker 1: around and your Tony Lama boots and some girl would 310 00:16:24,640 --> 00:16:26,920 Speaker 1: have a close cigarette and oh yeah, all the clothes. 311 00:16:27,240 --> 00:16:29,440 Speaker 1: I mean, what's the difference between a close cigarette from 312 00:16:29,440 --> 00:16:34,600 Speaker 1: Indonesia or Gentan from France and the flavored jewels, right? 313 00:16:34,600 --> 00:16:36,600 Speaker 1: I mean that's the problem. Right. And then that's why 314 00:16:36,920 --> 00:16:38,520 Speaker 1: you know, it's so hard to talk about this merger, 315 00:16:38,560 --> 00:16:41,160 Speaker 1: because I think what these companies wanted to be about 316 00:16:41,320 --> 00:16:43,960 Speaker 1: is this future, and they're seeing themselves a sort of 317 00:16:44,000 --> 00:16:47,240 Speaker 1: reduced risk products. It's no longer cigarettes, it's these reduced 318 00:16:47,320 --> 00:16:49,600 Speaker 1: risk They're they're safer, but we don't actually know that, 319 00:16:49,640 --> 00:16:50,920 Speaker 1: and it's going to take a lot of time to 320 00:16:51,000 --> 00:16:53,760 Speaker 1: find out the effects of this. Okay, you tarrells Chappelle 321 00:16:53,800 --> 00:16:56,880 Speaker 1: with us, folks, and really an extensive conversation on something 322 00:16:56,920 --> 00:16:59,800 Speaker 1: that really touches all of us, whatever your beliefs on 323 00:16:59,840 --> 00:17:05,320 Speaker 1: the American politics of tobacco use. Is nicotine safe? I 324 00:17:05,320 --> 00:17:08,560 Speaker 1: mean the goals to get from no smoke, no lungs, 325 00:17:09,200 --> 00:17:12,760 Speaker 1: no Chesterfield cancer from years ago? Great? I mean to 326 00:17:12,800 --> 00:17:14,399 Speaker 1: this day I look at a pack of Knson, I 327 00:17:14,440 --> 00:17:17,080 Speaker 1: can't look at them because my grandfather smoked three packs 328 00:17:17,080 --> 00:17:20,640 Speaker 1: a day down to the filter. Great, that's the past. 329 00:17:21,440 --> 00:17:24,919 Speaker 1: But is pure nicotine safe if we get rid of 330 00:17:24,920 --> 00:17:27,920 Speaker 1: the past, I don't know, but we know don't. Is addictive, right, 331 00:17:28,040 --> 00:17:30,320 Speaker 1: And that's what these companies are counting on. They need 332 00:17:30,320 --> 00:17:33,080 Speaker 1: that to be the basis of their future. And then 333 00:17:33,160 --> 00:17:35,240 Speaker 1: on the side of that, they're also looking at marijuana 334 00:17:35,280 --> 00:17:38,520 Speaker 1: of course, but right now the focus is on nicotine 335 00:17:38,640 --> 00:17:41,000 Speaker 1: products that are in a different form than a cigarette. 336 00:17:41,880 --> 00:17:45,120 Speaker 1: And when will we see this? So next month, Icos 337 00:17:45,240 --> 00:17:47,520 Speaker 1: is going to launch in the US, and that's the 338 00:17:47,600 --> 00:17:51,280 Speaker 1: catalyst for this merger of p m I and Altria. 339 00:17:51,400 --> 00:17:54,560 Speaker 1: I think so because Altria would be sharing the profits 340 00:17:54,560 --> 00:17:57,120 Speaker 1: on that so Philip Morris sells that in other parts 341 00:17:57,160 --> 00:17:59,159 Speaker 1: of the world. In the US, Altria would be the 342 00:17:59,160 --> 00:18:01,440 Speaker 1: ones selling it. So I think part of the motivation 343 00:18:01,520 --> 00:18:03,760 Speaker 1: for merging now is Philip Morris won't have to split 344 00:18:03,800 --> 00:18:06,480 Speaker 1: those profits. They'll get all that margin, and also they'll 345 00:18:06,480 --> 00:18:08,639 Speaker 1: get to take advantage of al Trea's cash flow and 346 00:18:08,680 --> 00:18:10,960 Speaker 1: do things like dividends and buy backs. I think that's 347 00:18:10,960 --> 00:18:14,240 Speaker 1: the basis for coming together now. Um, but again it's 348 00:18:14,280 --> 00:18:17,639 Speaker 1: it's all about these new products that they're trying to 349 00:18:18,160 --> 00:18:21,439 Speaker 1: not only have some growth and get new customers so 350 00:18:21,480 --> 00:18:24,440 Speaker 1: to speak, but also change their image into something that 351 00:18:24,800 --> 00:18:26,800 Speaker 1: is a little bit more wholesome seeming, right. And I 352 00:18:26,800 --> 00:18:29,680 Speaker 1: think that's what they're doing, is the proof of growth 353 00:18:30,160 --> 00:18:35,520 Speaker 1: in other cities or nations in Europe and in Japan. Yes, 354 00:18:35,600 --> 00:18:37,920 Speaker 1: but again it's it's just so small at this point, 355 00:18:38,240 --> 00:18:41,040 Speaker 1: but I think that they're what they're trying to say is, 356 00:18:41,280 --> 00:18:43,000 Speaker 1: you know, we're we're doing a really good job of 357 00:18:43,040 --> 00:18:45,760 Speaker 1: converting cigarette smokers to these products. Whether that's a good 358 00:18:45,800 --> 00:18:48,640 Speaker 1: thing or not. You know, that's another debate. But from 359 00:18:48,640 --> 00:18:51,480 Speaker 1: the company's standpoint, they do see this as the future 360 00:18:51,480 --> 00:18:53,160 Speaker 1: and they're plowing a lot of money into it. And 361 00:18:53,440 --> 00:18:55,760 Speaker 1: cigarettes still drive the bulk of their business, but you'll 362 00:18:55,800 --> 00:18:57,760 Speaker 1: notice more and more they're going to be talking about 363 00:18:57,800 --> 00:19:02,080 Speaker 1: these other products. Breathing. Le Chapelle writing with a wonderful 364 00:19:02,119 --> 00:19:06,359 Speaker 1: density for Bloomberg opinion No smoking a cigarette Giants Reunion. 365 00:19:07,280 --> 00:19:10,399 Speaker 1: This is Philip Morrison all three as they look to 366 00:19:10,480 --> 00:19:25,719 Speaker 1: devices to change their future. Pausanian Tom Keene into the 367 00:19:25,720 --> 00:19:29,439 Speaker 1: markets and linking it into your future equity investment. We 368 00:19:29,480 --> 00:19:31,600 Speaker 1: are thrilled to bringing Alicia Levin and she's been very 369 00:19:31,640 --> 00:19:35,160 Speaker 1: good about not so much holding our hands in all 370 00:19:35,240 --> 00:19:41,640 Speaker 1: this August turmoil, but actually cogently thinking about a plan forward. 371 00:19:41,960 --> 00:19:44,800 Speaker 1: I just had a record low by three decimal points 372 00:19:45,359 --> 00:19:50,840 Speaker 1: in German tenure thirty year US Italian under one percent. 373 00:19:50,960 --> 00:19:57,240 Speaker 1: Italian tenure is dividend growth. The new coupon in the 374 00:19:57,480 --> 00:20:00,679 Speaker 1: short answer is yes. So the long end of the 375 00:20:00,680 --> 00:20:04,000 Speaker 1: curve is telling you everywhere is that the market does 376 00:20:04,040 --> 00:20:06,560 Speaker 1: not think that central banks are able to really rescue 377 00:20:06,560 --> 00:20:08,520 Speaker 1: these economies. And so the only way you're going to 378 00:20:08,640 --> 00:20:11,680 Speaker 1: get any return is going into the equity markets of 379 00:20:11,800 --> 00:20:15,560 Speaker 1: the steady dividend growing pain company. So what do you 380 00:20:15,640 --> 00:20:19,479 Speaker 1: do if and when price turns around? Paul? Do you 381 00:20:19,480 --> 00:20:21,640 Speaker 1: know bonds can go lower? And that's what I hear. 382 00:20:21,720 --> 00:20:25,200 Speaker 1: It's a m How do you manage you know, forget 383 00:20:25,200 --> 00:20:28,679 Speaker 1: about fancy talk equity, gamma, beta, delta. How do you 384 00:20:28,760 --> 00:20:32,280 Speaker 1: manage across the kitchen table at home knowing someday price 385 00:20:32,400 --> 00:20:35,320 Speaker 1: will go down in bonds? Well, that's true, when when 386 00:20:35,320 --> 00:20:37,560 Speaker 1: this turn is going to be vicious, right, It's it's 387 00:20:37,560 --> 00:20:39,960 Speaker 1: going to be a vicious term because every trade right 388 00:20:40,000 --> 00:20:42,240 Speaker 1: now is into the long end of the bond market. 389 00:20:42,800 --> 00:20:45,560 Speaker 1: So you've got to be well diversified on the credit side, 390 00:20:45,560 --> 00:20:47,240 Speaker 1: and on the sovereign debt side. You've got to go 391 00:20:47,320 --> 00:20:49,239 Speaker 1: short end as well, and you've got to look at 392 00:20:49,320 --> 00:20:52,959 Speaker 1: high quality investment grade credit as well to round out 393 00:20:54,240 --> 00:20:56,960 Speaker 1: the fix income side. So you can't just be you 394 00:20:57,040 --> 00:20:58,719 Speaker 1: just can't be in the sovereign debt market, all right. 395 00:20:58,760 --> 00:21:01,200 Speaker 1: So we haven't inverted yield curve here in the US 396 00:21:01,280 --> 00:21:03,479 Speaker 1: looking at the twos in ten years, where does that 397 00:21:03,520 --> 00:21:05,480 Speaker 1: bring us in terms of the inflation? I'm in the 398 00:21:05,480 --> 00:21:09,480 Speaker 1: recession discussion. This is actually a great question because it 399 00:21:09,520 --> 00:21:12,240 Speaker 1: goes so deep. So every person who comes on I'm 400 00:21:12,280 --> 00:21:14,920 Speaker 1: sure you're hearing, is saying, well, the actually the inversion 401 00:21:14,920 --> 00:21:17,360 Speaker 1: doesn't matter right now because the long end is being 402 00:21:17,359 --> 00:21:20,520 Speaker 1: controlled by the global bond market, and I'm very sympathetic 403 00:21:20,640 --> 00:21:25,360 Speaker 1: to that. The issue is whether, once the inversion happens, 404 00:21:25,840 --> 00:21:28,560 Speaker 1: whether the FED is forced to action because it has 405 00:21:28,600 --> 00:21:32,159 Speaker 1: a causal effect on the economy. And I think the 406 00:21:32,200 --> 00:21:35,320 Speaker 1: evidence is that it does actually at some point, not today, 407 00:21:35,600 --> 00:21:37,600 Speaker 1: but at some point banks will be less likely to 408 00:21:37,680 --> 00:21:41,440 Speaker 1: lend and so we'll have a further slowing of the economy. 409 00:21:41,600 --> 00:21:44,040 Speaker 1: So I think the FED is forced to cut. So 410 00:21:44,680 --> 00:21:47,240 Speaker 1: the Fed, you know, everybody's looking at the Fed. The 411 00:21:47,320 --> 00:21:50,000 Speaker 1: cut again in part due to trade. We had a 412 00:21:50,080 --> 00:21:54,800 Speaker 1: very news worthy opinion piece yesterday by bed Bill Dudley 413 00:21:55,000 --> 00:21:57,879 Speaker 1: had sparked a lot of conversation. Do you think the 414 00:21:58,080 --> 00:22:00,040 Speaker 1: Fed to what extend? You think the Fed is looking 415 00:22:00,080 --> 00:22:02,680 Speaker 1: at trade when it thinks about its next mover too. 416 00:22:03,680 --> 00:22:07,480 Speaker 1: So I think that trade is intricately linked to what 417 00:22:07,600 --> 00:22:11,120 Speaker 1: the Fed does next. And the basis points for September, 418 00:22:11,119 --> 00:22:14,320 Speaker 1: which is essentially locked into the market right now, and 419 00:22:14,440 --> 00:22:17,880 Speaker 1: the fact that Powell left open the possibility of further 420 00:22:18,000 --> 00:22:21,760 Speaker 1: cuts this year is all due to the uncertainty created 421 00:22:21,880 --> 00:22:24,440 Speaker 1: by trade. But as he said last week, the Fed 422 00:22:24,560 --> 00:22:28,400 Speaker 1: actually it is not clear it can affect this at all. 423 00:22:28,440 --> 00:22:30,639 Speaker 1: All it can affect is sentiment and the cost of 424 00:22:30,680 --> 00:22:32,919 Speaker 1: capital here in the US, and if it helps on 425 00:22:32,960 --> 00:22:35,280 Speaker 1: the margins then it should do. So. I think that 426 00:22:35,320 --> 00:22:38,080 Speaker 1: the Dudley piece yesterday was interesting, but in the end 427 00:22:38,160 --> 00:22:45,719 Speaker 1: it creates more instability and conversation about you know, degrigating 428 00:22:45,720 --> 00:22:48,400 Speaker 1: our our institutions. Frankly, with the way things were, it's 429 00:22:48,400 --> 00:22:50,320 Speaker 1: not was not helpful to the stability of the market. 430 00:22:50,359 --> 00:22:55,160 Speaker 1: And just moments ago I should mention Ferdinando Giuliano outstanding 431 00:22:55,200 --> 00:22:58,120 Speaker 1: in Europe for Bloomberg Opinion, just wrote a very thoughtful 432 00:22:58,119 --> 00:23:01,680 Speaker 1: piece off the Dudley essay that just breaking right now. Paul. 433 00:23:01,720 --> 00:23:05,080 Speaker 1: We we may get Fernando on Bloomberg surveillance this morning. 434 00:23:05,280 --> 00:23:08,560 Speaker 1: Oh we have them next. Very good. That's just what 435 00:23:08,640 --> 00:23:10,800 Speaker 1: a team, you know what I mean, you know, to 436 00:23:10,920 --> 00:23:13,680 Speaker 1: go from a staff for twenty five out to people 437 00:23:13,720 --> 00:23:16,840 Speaker 1: and it's just amazing how that works. Paul. So, I mean, 438 00:23:17,160 --> 00:23:19,280 Speaker 1: so does that suggest here, you know, kind of the 439 00:23:19,320 --> 00:23:21,879 Speaker 1: uncertainty of trade, the uncertainty of the impact of the FED, 440 00:23:22,359 --> 00:23:24,080 Speaker 1: that what do we do in the markets? Are kind 441 00:23:24,080 --> 00:23:25,880 Speaker 1: of a tight range bound market and we just kind 442 00:23:25,880 --> 00:23:28,440 Speaker 1: of wait for new news. I guess yes. So so 443 00:23:28,480 --> 00:23:30,639 Speaker 1: our message right here to investors that we're in a 444 00:23:30,720 --> 00:23:32,760 Speaker 1: we're in a trading range and it may not be tight, 445 00:23:33,040 --> 00:23:36,840 Speaker 1: but we're in a trading range here through September through October. 446 00:23:36,840 --> 00:23:38,960 Speaker 1: We just had news out of the UK today that 447 00:23:39,359 --> 00:23:42,200 Speaker 1: that the Prime Ministers is looking at suspending parliaments so 448 00:23:42,320 --> 00:23:44,840 Speaker 1: we can get breaks it through. These are not coming 449 00:23:45,320 --> 00:23:47,639 Speaker 1: times for the market. You should expect the market to 450 00:23:47,640 --> 00:23:50,080 Speaker 1: go lower. I think there's a couple of interesting entry 451 00:23:50,119 --> 00:23:53,440 Speaker 1: points and people look, you're looking at the twenty hundred level, 452 00:23:53,480 --> 00:23:56,639 Speaker 1: and then if that breaks, probably, but there's clearly a 453 00:23:56,680 --> 00:23:59,240 Speaker 1: lid here. It's hard, it's gonna be harder to move 454 00:23:59,440 --> 00:24:02,800 Speaker 1: higher and easier to move lower. But I think you 455 00:24:02,840 --> 00:24:05,520 Speaker 1: have to be invested. I got one final question Alicia 456 00:24:05,560 --> 00:24:07,399 Speaker 1: Levine with this bn y melon you can hear, of 457 00:24:07,440 --> 00:24:10,639 Speaker 1: course in her voice or academic authority. You know Shingle 458 00:24:10,720 --> 00:24:13,879 Speaker 1: from Brown You wandered by the University of Chicago for 459 00:24:13,960 --> 00:24:17,280 Speaker 1: some parchment in school in pelo Alto as well, and 460 00:24:17,320 --> 00:24:19,480 Speaker 1: you've really done a lot in the invest in business. 461 00:24:20,119 --> 00:24:24,760 Speaker 1: Is Billions accurate the TV show Billions? When you watch Billions, 462 00:24:25,119 --> 00:24:27,600 Speaker 1: are you like, you know Bobby x L Rod gets 463 00:24:27,640 --> 00:24:30,440 Speaker 1: it right? I mean, is it even close to accurate? 464 00:24:31,000 --> 00:24:35,720 Speaker 1: The first season was brilliant. Then what happened? Then they 465 00:24:35,760 --> 00:24:38,359 Speaker 1: lost their mojo? Thank you? They lost their mojo. But 466 00:24:38,400 --> 00:24:41,359 Speaker 1: the first season was brilliant and the lingo of the 467 00:24:41,400 --> 00:24:44,040 Speaker 1: traders was terrific. It's like in the Big Short, the 468 00:24:44,040 --> 00:24:46,199 Speaker 1: way they talk. I go, that's normal, that's normal. The 469 00:24:46,240 --> 00:24:49,159 Speaker 1: interesting thing about the third season, which I thought was lousy, 470 00:24:49,520 --> 00:24:53,600 Speaker 1: is listening to the traders who are Generation X talk 471 00:24:53,720 --> 00:24:56,960 Speaker 1: about not knowing who the other person is on the 472 00:24:57,000 --> 00:25:00,200 Speaker 1: other side of the trade to pick up on phone, 473 00:25:00,280 --> 00:25:02,720 Speaker 1: used to pick up the phone. You had relationships with everybody, 474 00:25:02,840 --> 00:25:04,919 Speaker 1: and they're like, I have no one to call. How 475 00:25:04,920 --> 00:25:06,280 Speaker 1: am I going to get this trade off? I have 476 00:25:06,359 --> 00:25:09,359 Speaker 1: no one to call? That was brilliant. That's in the 477 00:25:09,400 --> 00:25:11,400 Speaker 1: last two days. It would furrow you, me and Harry 478 00:25:11,480 --> 00:25:13,760 Speaker 1: Church what we've all gone through. That was the most important. 479 00:25:14,400 --> 00:25:17,440 Speaker 1: That was I mean, Billions, Paul, is this is streaming? 480 00:25:17,440 --> 00:25:19,880 Speaker 1: I mean, they need more billions to make streaming work right, 481 00:25:20,320 --> 00:25:22,520 Speaker 1: and they need to spend billions and billions and billions 482 00:25:22,640 --> 00:25:25,840 Speaker 1: more to make that streaming work. So, Alicia Levine, thank 483 00:25:25,880 --> 00:25:27,800 Speaker 1: you so much for joining Cheap Travis at B and 484 00:25:27,920 --> 00:25:44,879 Speaker 1: y Melan getting our thoughts on the market here. Ferdinando 485 00:25:44,920 --> 00:25:49,040 Speaker 1: Gilian Giuliano uh joins us now from Europe. I don't 486 00:25:49,080 --> 00:25:51,080 Speaker 1: even know where you are, Ferdinando. Are you in Rome 487 00:25:51,119 --> 00:25:53,600 Speaker 1: with Maria today or you someplace else we want to 488 00:25:53,640 --> 00:25:58,560 Speaker 1: be Oh, that's good, you're in Milan. I'll take Milan, 489 00:25:58,720 --> 00:26:01,840 Speaker 1: you know that would be great. In essays, Dudley's political 490 00:26:01,880 --> 00:26:04,920 Speaker 1: central Bank exists, and as you and John Fairroff said, 491 00:26:05,000 --> 00:26:08,639 Speaker 1: it is the e c B. How political will Madam 492 00:26:08,800 --> 00:26:12,240 Speaker 1: Leguard's e c B B? Well, I think she will 493 00:26:12,280 --> 00:26:14,159 Speaker 1: be political, and I can tell you that man in 494 00:26:14,200 --> 00:26:17,080 Speaker 1: Europe would love her to be very political and very 495 00:26:17,119 --> 00:26:21,440 Speaker 1: effective and finally making sure that the European governments make 496 00:26:21,880 --> 00:26:25,160 Speaker 1: that progress in the construction and completion of the monetary 497 00:26:25,280 --> 00:26:29,479 Speaker 1: Union that Europe has been missing for many years. So 498 00:26:29,560 --> 00:26:32,880 Speaker 1: it's not just I think, an expectation, but it's also 499 00:26:33,000 --> 00:26:36,959 Speaker 1: hoping that the ECB is political and your dance academic 500 00:26:37,040 --> 00:26:40,399 Speaker 1: has essay with a lot of history involved. You go 501 00:26:40,520 --> 00:26:42,960 Speaker 1: back where one of our listeners went this morning, which 502 00:26:43,000 --> 00:26:46,840 Speaker 1: is to define moral hazard. From where you sit in Europe, 503 00:26:47,359 --> 00:26:51,439 Speaker 1: is Chairman Powell and the FED redefining moral hazard as 504 00:26:51,520 --> 00:26:54,960 Speaker 1: they deal with an original president? Well, I think you 505 00:26:55,000 --> 00:26:59,920 Speaker 1: know what, certainly Bill Dudley is is redefining moral hazard. 506 00:27:00,040 --> 00:27:03,520 Speaker 1: The what what power is doing, I think is trying 507 00:27:03,560 --> 00:27:06,600 Speaker 1: to you know, keep the you know, just keep the 508 00:27:06,640 --> 00:27:10,320 Speaker 1: FED as independent as possible while without and I think 509 00:27:10,359 --> 00:27:13,080 Speaker 1: that's very very tough with what, as you say, very 510 00:27:13,119 --> 00:27:16,720 Speaker 1: regional president is doing. I think that the challenge in 511 00:27:17,160 --> 00:27:19,520 Speaker 1: Europe was quite the opposite in a way. Here the 512 00:27:19,520 --> 00:27:22,879 Speaker 1: president is being too intrusive in Europe. Mario Dragon e 513 00:27:22,920 --> 00:27:26,359 Speaker 1: c but didn't really have any political real political leader 514 00:27:26,480 --> 00:27:29,359 Speaker 1: of Europe to speak um, you know, to speak to. 515 00:27:29,520 --> 00:27:31,960 Speaker 1: I mean, obviously there was Chancellor angular America, but she's 516 00:27:31,960 --> 00:27:35,399 Speaker 1: still the Chancellor of Germany. Um. The absence of a 517 00:27:35,400 --> 00:27:39,199 Speaker 1: political leader made dragon is so political and luckily it 518 00:27:39,280 --> 00:27:43,920 Speaker 1: was effective. So Fernando, your countday is so timely because 519 00:27:43,920 --> 00:27:45,520 Speaker 1: I think a lot of people here in the US 520 00:27:45,560 --> 00:27:49,840 Speaker 1: are trying to understand what a what a more politicized 521 00:27:49,920 --> 00:27:53,000 Speaker 1: FED might look like. So what's the history been in 522 00:27:53,040 --> 00:27:56,280 Speaker 1: Europe with the e c B, And perhaps it's political 523 00:27:56,280 --> 00:27:58,040 Speaker 1: bent a little bit and you know, still trying to 524 00:27:58,080 --> 00:28:00,879 Speaker 1: wear that independence. Well. I think there are two sides 525 00:28:00,920 --> 00:28:03,560 Speaker 1: to it. One is with individual governments. I mean, in 526 00:28:03,720 --> 00:28:05,760 Speaker 1: a number of cases, the c B has had to 527 00:28:05,800 --> 00:28:09,879 Speaker 1: step in and either help banks with emergency liquidity or 528 00:28:09,920 --> 00:28:13,440 Speaker 1: help governments by buying their government bonds. And in all 529 00:28:13,480 --> 00:28:17,800 Speaker 1: these cases it's been asking for conditions, for guarantees that 530 00:28:18,440 --> 00:28:20,679 Speaker 1: you know, all these money would not be wasted because 531 00:28:20,720 --> 00:28:23,760 Speaker 1: the government and does something stupid with it or or 532 00:28:23,760 --> 00:28:26,520 Speaker 1: the bank is not solvent. And this happened in Ireland, 533 00:28:26,560 --> 00:28:29,480 Speaker 1: in Italy, in Greece, and this is you know, this 534 00:28:29,520 --> 00:28:31,800 Speaker 1: is a true an exchange between the central bank and 535 00:28:31,800 --> 00:28:34,480 Speaker 1: the and the government. But that means that the central 536 00:28:34,480 --> 00:28:37,280 Speaker 1: bank was being politically in a way. The second issue 537 00:28:37,359 --> 00:28:39,760 Speaker 1: is about the the euro as a whole, which I 538 00:28:39,760 --> 00:28:42,760 Speaker 1: don't think applies so much to the really to the 539 00:28:42,840 --> 00:28:45,120 Speaker 1: US because likely the US is in a much better 540 00:28:45,160 --> 00:28:47,560 Speaker 1: place from this point of view. That has been pushing 541 00:28:47,600 --> 00:28:53,080 Speaker 1: for greater Eurozone integration with some speeches and pressure on politicians, 542 00:28:53,160 --> 00:28:56,080 Speaker 1: and some would say this is political because you know, 543 00:28:56,120 --> 00:28:59,560 Speaker 1: why should the Central Bank promote a political project. But 544 00:28:59,600 --> 00:29:01,320 Speaker 1: at the end of the day, you know, dc behas 545 00:29:01,400 --> 00:29:03,560 Speaker 1: the euros and banks, and I think it's pretty normal 546 00:29:03,600 --> 00:29:08,000 Speaker 1: that it promotes the euro Giuliani with US folks. He 547 00:29:08,040 --> 00:29:11,120 Speaker 1: as an essay just out moments ago in the Bloomberg terminal, 548 00:29:11,600 --> 00:29:14,000 Speaker 1: and we will get that out to you on Twitter 549 00:29:14,040 --> 00:29:18,040 Speaker 1: as we can. William Dudley's political central Bank exists and 550 00:29:18,240 --> 00:29:21,880 Speaker 1: Mr Giuliano makes clear he believes it is Mario drug 551 00:29:22,600 --> 00:29:26,400 Speaker 1: ECB for lander. While we have you on Bloomberg surveillance, 552 00:29:26,880 --> 00:29:30,880 Speaker 1: give us a state of populism in Europe into the 553 00:29:31,120 --> 00:29:34,680 Speaker 1: autumn of two thousand nineteen with the news in Italy 554 00:29:35,160 --> 00:29:38,800 Speaker 1: but also in Eastern Europe. Give us a populism update. 555 00:29:39,560 --> 00:29:42,000 Speaker 1: But I think it's not doing. It's not going great 556 00:29:42,120 --> 00:29:45,440 Speaker 1: for populism this year. I mean clearly in the UK 557 00:29:45,640 --> 00:29:48,440 Speaker 1: we are what I think is the final battle between 558 00:29:48,720 --> 00:29:50,920 Speaker 1: you know, the I would say, the British populist to 559 00:29:50,960 --> 00:29:53,760 Speaker 1: our part of the lead campaign and you know, the 560 00:29:53,840 --> 00:29:56,840 Speaker 1: mainstream establishment. And we see how that ends in the 561 00:29:56,960 --> 00:29:59,400 Speaker 1: coming weeks. But see look at Italy, I mean the 562 00:29:59,720 --> 00:30:03,120 Speaker 1: kind of turbo populist government as I defined it between 563 00:30:03,160 --> 00:30:05,680 Speaker 1: the League and Five Star has failed. You know, the 564 00:30:05,720 --> 00:30:08,600 Speaker 1: government has collapsed and now five Star looks to be, 565 00:30:09,120 --> 00:30:11,520 Speaker 1: you know, set to join a new government. But this 566 00:30:11,640 --> 00:30:14,400 Speaker 1: would be a more mainstream government with the with the 567 00:30:14,560 --> 00:30:17,920 Speaker 1: center left Democrats, and the markets are really liking it. 568 00:30:18,040 --> 00:30:20,760 Speaker 1: Italian bonds, tenure bonds are now below one percent. But 569 00:30:20,880 --> 00:30:23,120 Speaker 1: I think it is the first time ever. Um So, 570 00:30:23,440 --> 00:30:27,800 Speaker 1: you know, look at France, Emmanuel mccron, very mainstreams having 571 00:30:27,840 --> 00:30:31,800 Speaker 1: a very very good few months. In Germany alternative for Deutschland, 572 00:30:31,840 --> 00:30:35,840 Speaker 1: the ultra right party not doing very well. Um So 573 00:30:36,000 --> 00:30:38,160 Speaker 1: I think you know, it's if you are, if you 574 00:30:38,360 --> 00:30:41,360 Speaker 1: don't really like European populism, I think this is a 575 00:30:41,440 --> 00:30:45,160 Speaker 1: pretty good, uh a few months for you. So Fernanda, 576 00:30:45,200 --> 00:30:48,040 Speaker 1: you said you're in Milan and we are jealous for that. 577 00:30:48,280 --> 00:30:50,800 Speaker 1: So just give us a sense of what the thinking 578 00:30:50,920 --> 00:30:53,520 Speaker 1: is with this new government in Italy. Does it it 579 00:30:53,560 --> 00:30:56,000 Speaker 1: does a you know, suggest any stabil greater level of 580 00:30:56,040 --> 00:30:59,880 Speaker 1: stability for Italian government and Tian economy. Well, I think short, 581 00:31:00,280 --> 00:31:05,080 Speaker 1: probably yes, because I remember the League had a faction 582 00:31:05,160 --> 00:31:07,280 Speaker 1: within the party which really wanted Italy out of the 583 00:31:07,560 --> 00:31:10,880 Speaker 1: of the Euro and Mattel Salvini, the league lead League 584 00:31:10,960 --> 00:31:14,720 Speaker 1: leader was you know, in a way promoting, you know, 585 00:31:14,880 --> 00:31:17,640 Speaker 1: was campaigning on or very least flirting with the idea 586 00:31:17,680 --> 00:31:20,280 Speaker 1: of Italy living the Euro. So the fact that he's 587 00:31:20,280 --> 00:31:22,640 Speaker 1: out of government is certainly an element of stability, and 588 00:31:22,680 --> 00:31:26,840 Speaker 1: that's what investors are looking at celebrating. But remember this 589 00:31:27,000 --> 00:31:30,240 Speaker 1: is a coalition of very strange bedfellows. It could it 590 00:31:30,280 --> 00:31:32,800 Speaker 1: could be quite a left wing government. Some some fear 591 00:31:33,440 --> 00:31:35,920 Speaker 1: and it's ald to be seen whether whether this would 592 00:31:35,920 --> 00:31:38,400 Speaker 1: be stable. I mean, I wouldn't really bet on its 593 00:31:38,400 --> 00:31:43,160 Speaker 1: stability long term. He writes a lot Republica in Italy. 594 00:31:43,400 --> 00:31:48,120 Speaker 1: Ferdinando Giuliano writing an important essay off of William Dudley's 595 00:31:48,120 --> 00:31:52,160 Speaker 1: work with Bloomberg Opinion Yesterday. Dudley's Political Central Bank exists. 596 00:31:52,240 --> 00:31:55,040 Speaker 1: It is a tour to force for Wall Street and 597 00:31:55,160 --> 00:31:58,560 Speaker 1: the history and detail of the e CD. Thanks for 598 00:31:58,680 --> 00:32:03,040 Speaker 1: listening to the Bloomberg's Banlast podcast. Subscribe and listen to 599 00:32:03,200 --> 00:32:08,920 Speaker 1: interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 600 00:32:09,520 --> 00:32:12,800 Speaker 1: I'm on Twitter at Tom Keane Before the podcast, you 601 00:32:12,880 --> 00:32:16,240 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio