WEBVTT - Ten-Year Yield Could Fall Before Rising, Bianco Says 0:00:00.080 --> 0:00:02.040 P and L is brought to you by proper Cloth, 0:00:02.120 --> 0:00:05.120 a leader in men's custom shirts, with proprietary smart sized 0:00:05.120 --> 0:00:08.720 technology and top rated customer service. Ordering a custom shirt 0:00:08.760 --> 0:00:11.680 has never been easier. Visit proper cloth dot com to 0:00:11.760 --> 0:00:19.920 order your first custom shirt today. Welcome to the Bloomberg 0:00:20.000 --> 0:00:22.599 P and L Podcast. I'm Pim Fox. Along with my 0:00:22.640 --> 0:00:25.759 co host Lisa Abramowitz. Each day we bring you the 0:00:25.800 --> 0:00:29.360 most important, noteworthy, and useful interviews for you and your money, 0:00:29.360 --> 0:00:32.360 whether at the grocery store or the trading floor. Find 0:00:32.400 --> 0:00:35.840 the Bloomberg P and L Podcast on iTunes, SoundCloud and 0:00:36.080 --> 0:00:44.800 at Bloomberg dot com. Bonds what to do with the 0:00:44.880 --> 0:00:47.600 bond market, We've got Jim Bianco. James Bianco is the 0:00:47.640 --> 0:00:52.479 president of Bianco Research, joining us from Chicago. Boy, you know, 0:00:52.880 --> 0:00:55.160 Jim Bianco, I think of the bond market continues the 0:00:55.160 --> 0:00:56.800 way it's going, they're not gonna be any people in 0:00:56.840 --> 0:00:59.360 the bond market much longer. No, I think they're in 0:00:59.400 --> 0:01:03.600 the sleeping You guys were talking about that. Yeah, they 0:01:03.640 --> 0:01:05.440 got their blankets, you know, they pull it up, they 0:01:05.440 --> 0:01:08.479 get that little pillow out from Tim. I'm so glad 0:01:08.480 --> 0:01:09.800 that you could join us. I don't know if you 0:01:09.840 --> 0:01:13.360 saw that the Feds Jim Bullard came out today and 0:01:13.360 --> 0:01:16.280 said that there's no need to discuss the Fed's balance sheet. 0:01:16.280 --> 0:01:19.080 People have been talking about when the Federal stopped reinvesting, 0:01:19.640 --> 0:01:22.600 what they get from their four point five trillion dollars 0:01:22.600 --> 0:01:25.880 of investments that they're holding. Um, what's your take on this? 0:01:26.000 --> 0:01:27.800 Do you think that they're going to have to talk 0:01:27.840 --> 0:01:31.160 about it given the amount of money that they're receiving 0:01:31.360 --> 0:01:34.440 from bonds being paid out and maturing. Yeah, I think 0:01:34.440 --> 0:01:36.880 they're going to have to talk about it. Um, the 0:01:36.880 --> 0:01:40.600 feds balance sheet has got trillions of dollars of Treasury 0:01:40.600 --> 0:01:45.039 securities on it. In simple terms, the bond market believes 0:01:45.160 --> 0:01:47.440 that all those bonds that are on the Fed's balance 0:01:47.440 --> 0:01:51.400 sheet are permanently out of circulation. They're never going to 0:01:51.520 --> 0:01:55.160 come back into circulation. So Bullet is saying, and what 0:01:55.280 --> 0:01:57.520 Bill Dudley has said and some others have said, be 0:01:57.640 --> 0:02:00.560 very very careful when you talk about reintroduced those bonds 0:02:00.560 --> 0:02:03.320 back into the market, because then you could have a 0:02:03.320 --> 0:02:06.680 shock in the market if they believe that. We have 0:02:06.760 --> 0:02:10.200 to make room and private accounts now you know, banks 0:02:10.280 --> 0:02:14.120 and and endowments and trusts inspectative accounts for trillions of 0:02:14.120 --> 0:02:17.120 dollars of securities which are locked away, which we think 0:02:17.200 --> 0:02:20.320 is forever in the Fed's balance sheet, can be very disruptive. 0:02:21.040 --> 0:02:23.760 To date, I don't think the market has listened much 0:02:23.800 --> 0:02:27.840 to that conversation because it's not going to until the 0:02:27.880 --> 0:02:30.280 two big architects of the balance sheet, Bill Dudley and 0:02:30.360 --> 0:02:32.440 Janet yell And speak on the subject. And they haven't. 0:02:32.919 --> 0:02:34.720 And now that Bullard has come out on the other side, 0:02:34.760 --> 0:02:37.080 it's going to reinforce that idea that man, that's just 0:02:37.160 --> 0:02:39.120 Fed talk. We don't really have to listen to it. 0:02:39.600 --> 0:02:41.120 Do you think we have to listen to it? I mean, 0:02:41.280 --> 0:02:45.520 aren't the mandates for the FED. Price stability and employment 0:02:45.840 --> 0:02:49.359 has nothing to do with protecting people against bond losses. Right? 0:02:49.600 --> 0:02:54.000 Price stability is another word for inflation. Since two thousand nine, 0:02:54.000 --> 0:02:56.160 when the recession ended, the Great Recession ended, what have 0:02:56.240 --> 0:02:59.359 we not had is inflation. So when the FED has 0:02:59.400 --> 0:03:02.760 this giant sheet and they run these extreme policies, they're 0:03:02.800 --> 0:03:05.120 allowed to get away with it, if you will, because 0:03:05.160 --> 0:03:09.160 we haven't had inflation. Now you get Donald Trump being elected, 0:03:09.160 --> 0:03:11.680 and you see consumer confidence at the seventeen year high, 0:03:11.680 --> 0:03:15.440 you see business optimism at forty year high. You see 0:03:15.480 --> 0:03:17.440 all of these numbers going through the roof, the stock 0:03:17.480 --> 0:03:21.320 markets at a new high, and there's talk of reflation, 0:03:21.840 --> 0:03:25.680 and part of that reflation talk is inflation as opposed 0:03:25.720 --> 0:03:28.600 to real growth. Maybe now, for the first time in 0:03:28.639 --> 0:03:31.600 seven years, eight years, we might actually get a pulse 0:03:31.639 --> 0:03:34.320 out of inflation, and it might force the Fed to 0:03:34.360 --> 0:03:36.600 have to deal with that. Up until now, they could 0:03:36.600 --> 0:03:40.000 just discuss ignore, you know, you know, trying out smart 0:03:40.040 --> 0:03:41.880 everybody about it, but they didn't have to do anything 0:03:41.920 --> 0:03:44.360 about it. But if we get inflation, they do have 0:03:44.440 --> 0:03:46.120 to start thinking about it. Jim, I don't know if 0:03:46.120 --> 0:03:48.640 you caught this, but yesterday Black Rocks Larry Fink was 0:03:48.680 --> 0:03:51.080 talking about his outlook on the bond market, and he 0:03:51.120 --> 0:03:53.559 said that he actually thinks that there's a higher likelihood 0:03:54.080 --> 0:03:57.040 of the ten year Treasury yelled going down from here, 0:03:57.160 --> 0:04:00.880 possibly going below two, rather than rising. So it sort 0:04:00.880 --> 0:04:03.280 of goes against this idea that we're actually going to 0:04:03.360 --> 0:04:07.680 see some inflation. I actually do agree with that. I 0:04:07.720 --> 0:04:09.480 think that the problem is, and this gets into the 0:04:09.520 --> 0:04:12.560 technicals of the bond market, I think we're going to 0:04:12.640 --> 0:04:14.520 see a bump up in inflation and I think that 0:04:14.600 --> 0:04:17.040 by two eighteen we're going to see higher yields. Now, 0:04:17.240 --> 0:04:20.320 that is the most consensus thing you can say, so 0:04:20.400 --> 0:04:23.440 much so that almost everybody in the bond market is 0:04:23.480 --> 0:04:26.240 positioned for that. So if the market does go to 0:04:26.240 --> 0:04:28.440 three percent by the by the spring of next year, 0:04:28.480 --> 0:04:31.760 everybody makes money. And it was we found with contrarian opinion. 0:04:31.760 --> 0:04:33.719 When everybody's lined up one way in the market, it 0:04:33.760 --> 0:04:35.920 tends to go the other way. So that's why I 0:04:35.920 --> 0:04:38.080 wouldn't be surprised if we do go below two percent. 0:04:38.279 --> 0:04:42.320 Like Larry said, first question, that idea that there's going 0:04:42.360 --> 0:04:44.479 to be inflation, and then we have the big rise 0:04:44.480 --> 0:04:48.240 of rates after that going and you know, finding out 0:04:48.240 --> 0:04:51.560 that Yett was there. It's just the problem is everybody's 0:04:51.600 --> 0:04:54.960 positioned for it right now, and usually when that happens, 0:04:54.960 --> 0:04:56.760 the market has a tendency to go the other way. 0:04:56.920 --> 0:04:59.599 So if every if everyone's wrong and the market goes 0:04:59.640 --> 0:05:02.200 the other way, who's going to suffer the biggest losses? 0:05:02.240 --> 0:05:04.560 And will this be something that everyone's talking about how 0:05:04.560 --> 0:05:06.839 there's a lot of hurt going on. Yeah, I think 0:05:06.839 --> 0:05:09.240 that you know right now, if you were to look 0:05:09.240 --> 0:05:13.680 at who is the biggest bet on rates going to 0:05:13.760 --> 0:05:17.320 three percent. It's the more speculative hedge fund accounts by 0:05:17.400 --> 0:05:19.560 some of the measures in the futures market. And uh 0:05:19.680 --> 0:05:23.359 they have the biggest short position ever ever in the 0:05:23.400 --> 0:05:26.440 in the bond market, betting on higher rates because they 0:05:26.480 --> 0:05:29.080 think Trump is going to bring back a reflation. They're 0:05:29.080 --> 0:05:33.160 on the firing line that they're going to be the 0:05:33.200 --> 0:05:36.160 most hurt by some kind of a fall in interest 0:05:36.279 --> 0:05:39.040 rates as opposed to arise. Jim, how long can they 0:05:39.040 --> 0:05:42.039 hold that position until the leverage starts to hurt? Oh? 0:05:42.240 --> 0:05:45.520 I think that if you start pushing rates down, you know, 0:05:45.720 --> 0:05:52.160 run under say twenty We're around two thirty four right now, 0:05:52.360 --> 0:05:54.880 right and we were at highest to sixty in mid December, 0:05:54.920 --> 0:05:57.400 so we're halfway there. I think that that's when the 0:05:57.440 --> 0:06:00.520 pain threshold will start to kick in, and then as 0:06:00.560 --> 0:06:03.320 you go underneath two it really kick in. Well, I 0:06:03.320 --> 0:06:05.479 thought about the spread though. I'm looking at the spread. 0:06:05.560 --> 0:06:09.360 Let's say the two ten uh spread one point one 0:06:09.520 --> 0:06:13.160 seven on the two year and the as you just said, 0:06:13.200 --> 0:06:17.520 the tenure two point three eight, so one, you know, 0:06:17.640 --> 0:06:21.240 one one versus two and a quarter, right, I think 0:06:21.240 --> 0:06:23.640 that you know, as you were to push the tenure 0:06:23.720 --> 0:06:26.240 down to two twenty or maybe down to two, you 0:06:26.279 --> 0:06:29.320 would see the YEO curve spread you write it's one seventeen, 0:06:29.760 --> 0:06:33.159 probably continue to narrow two and that would not bold 0:06:33.200 --> 0:06:35.480 well for financial stocks. And they've actually hit a little 0:06:35.480 --> 0:06:39.480 bit of turbulence yere recently because a wider spread they 0:06:39.560 --> 0:06:42.960 borrow shortland long benefits them and a narrow spread would 0:06:43.040 --> 0:06:45.279 hurt them. So if if everybody's two lined up for 0:06:45.360 --> 0:06:47.160 three percent rates, which would be good for the banks, 0:06:47.160 --> 0:06:49.479 and we wind up going to two, they could stumble 0:06:49.520 --> 0:06:51.920 in that environment as well. Okay, so let's say what 0:06:51.920 --> 0:06:54.599 what happens that you just said, Let's say it plays 0:06:54.600 --> 0:06:57.400 out or all of a sudden, you've got yields on anten, 0:06:57.440 --> 0:07:01.760 your treasury is plunging against everybody's senses. Mortgage rates do 0:07:01.800 --> 0:07:04.719 you think that they could continue to rise despite this 0:07:04.880 --> 0:07:07.960 or they also fall in tandem? I mean, are they 0:07:07.960 --> 0:07:11.080 basically linked at the hip at this point? Um? No, 0:07:11.200 --> 0:07:14.440 I think mortgage rates would there. They would fall on 0:07:14.480 --> 0:07:16.680 an absolute basis, but I would agree with you that 0:07:17.040 --> 0:07:19.679 the spread would white. They would not fall as much 0:07:20.240 --> 0:07:23.720 as treasuries would fall. Uh, So they wouldn't the couple 0:07:23.800 --> 0:07:25.160 all the way that one would go up in the 0:07:25.160 --> 0:07:27.400 other would would go down. And and I think that 0:07:27.480 --> 0:07:30.560 the reason that mortgage rates would fall is one thing 0:07:30.600 --> 0:07:34.680 the FED is working off of. There is the mortgage 0:07:34.720 --> 0:07:37.000 holdings are really working off their balance sheet fast. That 0:07:37.040 --> 0:07:40.200 means they're more in private sector. If we do get 0:07:40.200 --> 0:07:42.480 a reflation and that does get a bump up in 0:07:43.080 --> 0:07:46.440 housing starts and in refinancing, you could seem demand for 0:07:46.560 --> 0:07:50.040 mortgages and that could also keep their rates um higher 0:07:50.080 --> 0:07:52.240 than they would from a treasury, So you could see 0:07:52.240 --> 0:07:54.760 the widening spread. That's really interesting. So even if we 0:07:54.800 --> 0:07:58.600 see treasury yields decline, borrowing costs for people who are 0:07:58.600 --> 0:08:02.280 looking to borrow money to by a house might stay elevated. 0:08:02.320 --> 0:08:04.920 Thank you so much, Jim Bianco, always a pleasure speaking 0:08:04.960 --> 0:08:09.640 with you, President and founder of Bianco Research, longtime veteran 0:08:09.720 --> 0:08:13.840 of the bond market. Expecting that just like Larry Fink 0:08:13.920 --> 0:08:17.880 of Black Rock thinks possibly it's more likely for tenure 0:08:17.920 --> 0:08:34.520 treasure yields to fall before they rise. We've been talking 0:08:34.559 --> 0:08:39.520 a lot about the anti globalist trend, uh the populist 0:08:39.679 --> 0:08:45.240 wave that we've seedwash over really the entire world. We 0:08:45.320 --> 0:08:48.240 haven't heard as much about what this will do for travel, 0:08:48.480 --> 0:08:50.559 But now we have someone who can give us some insight. 0:08:50.640 --> 0:08:54.840 Alex Sosiah, chief executive officer of Apple Leisure Group, which 0:08:54.880 --> 0:08:57.560 is based in Philadelphia. Alex, do you have a sense 0:08:57.800 --> 0:09:03.840 that people will try novel less internationally given the populist 0:09:03.960 --> 0:09:08.600 backdrop in sort of the anti globalist sentiment that we've seen. Yeah, 0:09:08.600 --> 0:09:11.520 thank you. I I am concerned about that. What we 0:09:11.600 --> 0:09:13.920 see the trends in the short term is that we 0:09:14.000 --> 0:09:17.360 have stronger numbers for Americans traveling outside of the country, 0:09:17.360 --> 0:09:20.520 particularly to Mexico and the Caribbean, versus a year ago 0:09:20.679 --> 0:09:24.000 for traveling within this year, but it could be affecting 0:09:24.120 --> 0:09:26.719 soon if the territory continues to be the one to 0:09:26.800 --> 0:09:29.760 protect protectionism and uncertainty of what's going on in the 0:09:29.760 --> 0:09:31.560 airports and stuff like that. So, yeah, it is a 0:09:31.600 --> 0:09:34.480 concern that we have, although the big trends still shows 0:09:34.559 --> 0:09:37.160 very positive. Well, you've been doing this for what thirty 0:09:37.280 --> 0:09:40.280 more than thirty years? Can you sort of run down 0:09:40.320 --> 0:09:43.959 for us the destinations where you think investments at least 0:09:43.960 --> 0:09:49.280 in the actual infrastructure of hospitality our best our best 0:09:49.280 --> 0:09:52.520 looked at, whether it is Mexico, Costa Rica, Panama, where 0:09:52.520 --> 0:09:55.640 would you look. Yeah, well, that's the places that we're looking, 0:09:55.720 --> 0:09:59.040 that we're investing. And indeed, the places that you mentioned 0:09:59.040 --> 0:10:02.960 now that we are UH totally focused on on resorts, 0:10:02.960 --> 0:10:05.640 and on the resorts, the most profitable destinations happen to 0:10:05.640 --> 0:10:08.160 be the ones that have the biggest connectivity, the best 0:10:08.240 --> 0:10:12.040 natural resources, are lowest payroll, and and and and the 0:10:12.160 --> 0:10:16.320 avocation of tourism, particular to certain American tourism, the American 0:10:16.360 --> 0:10:21.000 tourism UM oriented destinations are the most profitable ones. And yes, 0:10:21.080 --> 0:10:24.360 the beaches in Mexico and Country Amaya, Loscaos, Portoa, that 0:10:24.400 --> 0:10:26.320 all those are great places. But also in the Caribbean 0:10:26.320 --> 0:10:30.319 there's great there. There are great opportunities at Jamaica, UH 0:10:30.400 --> 0:10:33.319 Talks and Cacos. Domerican Republic is growing very rapidly and 0:10:33.480 --> 0:10:37.680 with great returns. And and then we see opportunities in 0:10:37.720 --> 0:10:40.560 Central America, not just in contact in Costa Rica that 0:10:40.600 --> 0:10:42.080 it's been there for a longer period of time, but 0:10:42.120 --> 0:10:45.840 now we see emerging places in UH in Panama as well, 0:10:45.880 --> 0:10:50.000 hopefully so Nicaragua. And then we go south place like Colombia, 0:10:50.120 --> 0:10:52.880 it's also growing very rapidly with good returns and and 0:10:52.960 --> 0:10:57.360 good respond and great customer satisfaction Alex. In addition to 0:10:57.600 --> 0:11:00.920 some of the protection as to rhetorict that we've globally, 0:11:01.640 --> 0:11:05.240 there also is this feeling that generally people are feeling 0:11:05.280 --> 0:11:08.800 better about their economic wherewithal, particularly in the United States. 0:11:09.080 --> 0:11:13.080 Are you seeing that sort of trickle into plans for 0:11:13.400 --> 0:11:17.880 more expensive vacations or just more vacation plans in general. Yes, 0:11:18.080 --> 0:11:20.439 of course we see that that that that of course 0:11:20.600 --> 0:11:24.800 helps a lot. People are feeling better. The prices of 0:11:24.880 --> 0:11:27.880 flying outside of the United States in general is is 0:11:27.960 --> 0:11:31.760 cheaper than before. We have a tropic about four to 0:11:31.880 --> 0:11:34.120 the destination that we work with versus a year ago. 0:11:34.240 --> 0:11:36.800 So I think that the Americans are seeing more value 0:11:36.840 --> 0:11:39.000 for the morning one side and the other side. They 0:11:39.000 --> 0:11:42.680 are comfortable with their um with the with the overall economy, 0:11:42.800 --> 0:11:45.559 and I think that obviously helps the people to travel 0:11:46.040 --> 0:11:48.560 and we seek that. We see the number of new 0:11:48.600 --> 0:11:52.600 passports issuing in the United States now at fifteen million 0:11:52.640 --> 0:11:55.120 per year, about fifty percent or those so seven point 0:11:55.160 --> 0:11:59.480 seven seven point five million are reissuing passports renewals. But 0:11:59.520 --> 0:12:01.720 the other side point five our brand new passports. So 0:12:02.000 --> 0:12:05.240 in ten years you're talking about almost eighty million new 0:12:05.280 --> 0:12:08.160 passports in the United States, and it's still only forty 0:12:08.200 --> 0:12:10.360 percent of the population. We still have sixty percent of 0:12:10.400 --> 0:12:12.440 population in the United States without passports. So I do 0:12:12.520 --> 0:12:15.160 see a big trend of people getting passports, getting passports 0:12:15.160 --> 0:12:17.160 of course to travel outside of the country. And the 0:12:17.200 --> 0:12:20.760 biggest region that it's utilize for the utilization of those 0:12:20.800 --> 0:12:23.920 passports is a Mexican and Caribbean. So I see a 0:12:23.960 --> 0:12:27.480 big growth, a big trends traveling internationally. It's becoming more 0:12:28.080 --> 0:12:31.560 for everyone, more a commodity. But within those experienced travelers, 0:12:31.600 --> 0:12:34.640 certainly they're spending more money and looking more sophistication. There's 0:12:34.640 --> 0:12:37.320 also much better product. Well, when you talk about product, 0:12:37.400 --> 0:12:39.199 alex I wonder if you could tell us is there 0:12:39.240 --> 0:12:43.240 an opportunity for an investor in Mexico. Are there hotel 0:12:43.360 --> 0:12:47.600 projects that are looking for investors that maybe have been 0:12:47.679 --> 0:12:51.240 stymied because of the change or the parent change in 0:12:51.360 --> 0:12:55.160 policy because of the Trump administration. I don't, I don't. 0:12:55.160 --> 0:12:57.520 I don't think that because of the Trump administration has 0:12:57.520 --> 0:12:59.520 slowed down any of the projects that are down there. 0:12:59.520 --> 0:13:03.080 But certainly there's always an opportunity for American investors to 0:13:03.080 --> 0:13:05.840 go and invest in in places in Mexico or you know, 0:13:06.360 --> 0:13:10.559 or in other destinations in the Caribbean. In this case, Uh, 0:13:10.880 --> 0:13:13.599 the American investors. In the case of our company, we 0:13:13.760 --> 0:13:17.960 just had KKR and CASEL investing big time in our company. Uh, 0:13:18.080 --> 0:13:20.720 they're being very shy so far. The Americans have not 0:13:20.880 --> 0:13:24.520 very active in this In this sector is mainly dominant 0:13:24.520 --> 0:13:28.920 by regional and local investors as well as European investors. 0:13:29.160 --> 0:13:32.120 So there's not so much activity so far for the 0:13:32.200 --> 0:13:34.199 for the for the for the U S investors and 0:13:34.240 --> 0:13:36.360 particularly for the U S banks to participate in the 0:13:36.440 --> 0:13:39.800 leisure sector. On the hospitality in Mexico. But I see 0:13:39.920 --> 0:13:43.319 a lot more appetite and a lot more oppenness of 0:13:43.480 --> 0:13:45.680 going and compete and start investing there. So I don't 0:13:45.679 --> 0:13:48.880 see any projects slowing down. H. But what I do 0:13:48.960 --> 0:13:51.480 see is a create opportunity to spit that up. We 0:13:51.559 --> 0:13:53.480 gotta leave it there. I want to thank you very much, 0:13:53.720 --> 0:13:57.480 Alex Dosiah. He's the chief executive of Apple Leisure Group 0:14:07.679 --> 0:14:09.640 P and L is brought to you by proper Cloth, 0:14:09.760 --> 0:14:12.840 a leader in men's custom shirts. At proper cloth dot com, 0:14:13.000 --> 0:14:16.280 ordering custom shirts has never been easier. Create your custom 0:14:16.360 --> 0:14:19.720 shirt size, by answering ten easy questions, select from over 0:14:19.800 --> 0:14:23.480 five fabrics to suit your personal taste. Shirts start from 0:14:23.560 --> 0:14:26.160 eighty five dollars and are delivered in just two weeks 0:14:26.400 --> 0:14:30.400 with proper Cloths perfect fit guarantee. Remakes are completely free 0:14:30.480 --> 0:14:34.320 and expert staff are standing by to help. For premium quality, 0:14:34.400 --> 0:14:38.400 perfect fitting shirts, visit proper cloth dot com Custom shirts 0:14:38.440 --> 0:14:48.840 made Smarter. You know who did some innovation. Theresa May, 0:14:49.120 --> 0:14:54.320 Prime Minister of the United Kingdom. She innovated by convincing 0:14:54.320 --> 0:14:59.600 the Parliament to uh pass her plan to exit the 0:14:59.640 --> 0:15:03.920 europe Pian Union. It comes with a catch, though. Let's 0:15:03.960 --> 0:15:06.520 stay a little bit more into that with Sarah Jane Mahmoud, 0:15:06.600 --> 0:15:10.640 government analyst with Bloomberg Intelligence in London. So, Sarah, can 0:15:10.680 --> 0:15:14.280 you first just give us a rundown on what exactly 0:15:14.360 --> 0:15:18.760 Parliament past giving Theresa May the ability to go ahead 0:15:18.880 --> 0:15:24.080 and start the process of excuting the European Union. Hi? There, Yes, sure, 0:15:24.600 --> 0:15:27.800 And so yesterday and MP's in the House of Commons 0:15:28.280 --> 0:15:32.120 passed the bill that gives Raiser May permission to activate 0:15:32.240 --> 0:15:36.640 Article fifty of the Lisbon Treaty, effectively kickstarting exit talks 0:15:36.680 --> 0:15:40.600 for Brexit with EU leaders and however she doesn't have 0:15:40.800 --> 0:15:43.600 a free pass as yet because the bill now goes 0:15:43.720 --> 0:15:46.960 to the House of Lords. I'm who from the twentieth 0:15:46.960 --> 0:15:50.200 of February will start considering whether or not Traiser May 0:15:50.240 --> 0:15:53.400 can activate Article fifty by the end of March as 0:15:53.400 --> 0:15:56.320 she wants to. What is the outlook for the House 0:15:56.360 --> 0:16:00.000 of Lords vote? Um, Well, the House of Lords um 0:16:00.080 --> 0:16:04.440 mainly opposed to activating Article fifty and to Brexit. However, 0:16:04.480 --> 0:16:07.120 as they're an unelected body, they would be unlikely to 0:16:07.200 --> 0:16:10.880 block the bill itself, but they could take their time 0:16:10.920 --> 0:16:15.280 to consider it and make possible amendments, for example, make 0:16:15.560 --> 0:16:20.640 the activation of Article fifty contingent on the government considering 0:16:21.240 --> 0:16:25.400 staying in the European Economic Area or securing continued access 0:16:25.400 --> 0:16:29.520 to the EU Single Market for UK based financial services companies. 0:16:29.800 --> 0:16:34.000 So in other words, um, this might become a pretty thorny, 0:16:34.040 --> 0:16:37.200 sticky issue. Just because this means that Theresa May can 0:16:37.240 --> 0:16:39.760 start the process, it doesn't necessarily mean that it will 0:16:39.760 --> 0:16:41.600 speed it up by any means, and it sort of 0:16:41.640 --> 0:16:44.000 remains to be seen whether Parliament will work with her 0:16:44.160 --> 0:16:47.080 on some kind of constructive basis to get through a 0:16:47.120 --> 0:16:51.680 plan that is palatable for for everybody involved exactly. I mean, 0:16:51.760 --> 0:16:56.280 it's likely that the House of Lords will ultimately pass 0:16:56.360 --> 0:17:00.480 the bill allowing the government to activate Article fifty um. 0:17:00.480 --> 0:17:03.800 And it's also likely that because tres and May wants 0:17:03.840 --> 0:17:07.040 to activate Article fifty start exit talks of the leaders 0:17:07.080 --> 0:17:10.480 by the end of March, a self imposed deadline. Um. 0:17:10.520 --> 0:17:12.960 I think ultimately she wants to do this during the 0:17:13.040 --> 0:17:17.120 next European Council meeting that's set for March the ninth, UM. 0:17:17.280 --> 0:17:22.560 So she's hoping that the bill will get approval before them. Sarah, 0:17:22.640 --> 0:17:26.320 you know, just assooming out a little bit as as 0:17:26.359 --> 0:17:29.439 a member as somebody who lives in London. How has 0:17:29.480 --> 0:17:31.840 the conversation changed. I mean, when you go out to dinner, 0:17:32.040 --> 0:17:35.119 you go to the pub, is everybody still talking about 0:17:35.160 --> 0:17:38.000 Brexit and Brexit negotiations? So people still care? Are they 0:17:38.080 --> 0:17:40.919 paying close attention to all of these machinations or are 0:17:40.960 --> 0:17:44.000 they kind of separating themselves from it, kind of assuming 0:17:44.040 --> 0:17:46.880 that things are going to keep going. I mean, I think, 0:17:46.920 --> 0:17:49.440 to be honest, there is a lot of Brexit fatigue 0:17:49.600 --> 0:17:53.760 at the moment um in professional and social circles. But 0:17:53.880 --> 0:17:56.560 a key issue looking at the financial services sector is 0:17:56.640 --> 0:18:01.280 whether or not banks fund managers, insurers, payment service providers 0:18:01.320 --> 0:18:04.760 and more. M can continue to access the EU market 0:18:05.280 --> 0:18:08.920 at once the UK exits the EU, which gift RAISU 0:18:09.000 --> 0:18:12.520 may can activate Article fifty by the end of March. UM. 0:18:12.560 --> 0:18:15.360 It would be likely the UK would leave the European 0:18:15.480 --> 0:18:18.200 Union around about April two thousand and ninety. What are 0:18:18.240 --> 0:18:22.120 people in London worried about losing their jobs? I think 0:18:22.160 --> 0:18:25.680 that there is a big concern that many financial institutions 0:18:25.720 --> 0:18:31.760 are likely to move their operations into another EU member state. UM. 0:18:31.960 --> 0:18:36.159 But I guess until there's more clarity, until Article fifty 0:18:36.200 --> 0:18:40.919 is activated and negotiations start taking place, UM, there's just 0:18:40.960 --> 0:18:45.320 a lot of uncertainty here. How does passporting relate directly 0:18:45.359 --> 0:18:50.400 to the sales that financial companies currently enjoy? Okay, So 0:18:50.680 --> 0:18:54.520 under the passporting regime, the companies financial services companies that 0:18:54.600 --> 0:18:58.320 are based in the UK, regardless of where they are incorporated. UM, 0:18:58.359 --> 0:19:02.639 they have free access to over twenty seven European countries, 0:19:03.160 --> 0:19:06.119 and they're allowed to establish a branch or provide cross 0:19:06.160 --> 0:19:10.639 border services without needing local authorization in every single country, 0:19:10.720 --> 0:19:13.120 and they generally only have to comply with one rule 0:19:13.200 --> 0:19:16.760 book rather than up to twenty eight for example, um 0:19:16.880 --> 0:19:20.879 Tresa May's plan is basically a hard Brexit, which means 0:19:20.920 --> 0:19:25.000 to leave the EU without continued access to the Single Market, 0:19:25.119 --> 0:19:28.760 or rather continued membership of the Single Market. Um So 0:19:28.960 --> 0:19:33.160 with that passporting rights would be lost and financial services 0:19:33.200 --> 0:19:35.600 companies that have their base in the UK would need 0:19:35.640 --> 0:19:39.320 to seek alternative ways to access the EU market. Now, 0:19:39.400 --> 0:19:42.040 the white paper that the government published last week didn't 0:19:42.080 --> 0:19:45.399 really give any clarity on what special deal they're looking 0:19:45.520 --> 0:19:49.160 to to make with EU leaders, and similarly EU leaders 0:19:49.200 --> 0:19:52.040 won't really show their cards and they won't indicate what 0:19:52.200 --> 0:19:55.200 they might be able to offer the UK until Article 0:19:55.280 --> 0:19:57.880 fifty is activated. I want to thank you very much 0:19:58.080 --> 0:20:01.200 for your insight in your time. Sarah Mahmwood is a 0:20:01.240 --> 0:20:05.200 government analyst for Bloomberg Intelligence based in London. Of course, 0:20:05.240 --> 0:20:08.919 Bloomberg Intelligence providing unique in real time research in a 0:20:09.000 --> 0:20:12.560 variety of industries and also government as well as market 0:20:12.560 --> 0:20:15.720 factors that affect business. Just type B I go on 0:20:15.760 --> 0:20:20.160 the Bloomberg to get all of that Bloomberg Intelligence research. 0:20:20.240 --> 0:20:22.119 You know, every time I see that a bank or 0:20:22.440 --> 0:20:25.200 firm is moving their operations out of London elsewhere in 0:20:25.280 --> 0:20:28.359 the in the United the European Union or the U S. 0:20:28.400 --> 0:20:30.359 I have to think, is this because of Brexit? Is 0:20:30.359 --> 0:20:32.880 this become of Brexit? But perhaps perhaps it's just people 0:20:32.880 --> 0:20:34.880 are sitting and waiting. I guess we'll have to say 0:20:35.040 --> 0:20:49.800 it could be. I want to call on Sharudi sing, 0:20:49.960 --> 0:20:56.280 our agriculture Companies reporter for Bloomberg News, joining us from Chicago. Sharudi, 0:20:56.320 --> 0:20:59.240 I'm wonder if you could describe for US an industry 0:20:59.280 --> 0:21:01.800 that many people may not know the details of but 0:21:02.000 --> 0:21:06.240 are the recipient of. This is the meat packing industry, 0:21:06.760 --> 0:21:10.040 and uh, maybe you could give us the sort of 0:21:10.119 --> 0:21:13.879 rundown on how a steak actually arrives on the plate 0:21:13.960 --> 0:21:20.320 of a diner and how that is connected to foreign policy. Sure, absolutely, 0:21:20.440 --> 0:21:23.640 so good to be with you. Um, the meat industry 0:21:23.640 --> 0:21:27.280 in the US UM employs a lot of different people, 0:21:27.720 --> 0:21:31.480 and um, it's it's a long supply chain that starts 0:21:31.480 --> 0:21:34.480 with a farmer that you're talking specifically about steak. You've 0:21:34.480 --> 0:21:38.639 got farmers who raise cows and calves. Those cattle go 0:21:38.800 --> 0:21:42.320 onto feed lots, and then those cattle that are battened 0:21:42.359 --> 0:21:45.040 up at feed lots then eventually go to the meat 0:21:45.040 --> 0:21:48.960 packing plants. And the meat packing plants are where we 0:21:49.080 --> 0:21:53.080 have a number of different types of workers. They're one 0:21:53.080 --> 0:21:57.520 of the larger segments is the immigrant population. Particularly over 0:21:57.520 --> 0:22:01.680 the last few decades, the immigrant workers increased um and 0:22:02.040 --> 0:22:05.240 more recently, in the last decade or so, we've seen 0:22:05.800 --> 0:22:09.199 refugees become a fixture in these plants. So, shrewd I 0:22:09.240 --> 0:22:11.600 was just looking at your story and you say that 0:22:11.960 --> 0:22:15.320 immigrants hold more than one third of these jobs in 0:22:15.320 --> 0:22:18.760 the United States and wondering, shrewdly from your sources, what 0:22:18.800 --> 0:22:22.720 are you hearing as far as what recent immigration policies 0:22:22.720 --> 0:22:27.960 and proposals, what effect they would have on their business? Well, 0:22:28.080 --> 0:22:30.600 right now, I think a lot of the companies are 0:22:30.640 --> 0:22:33.119 monitoring the situation that when we talk to some of 0:22:33.160 --> 0:22:36.160 the industry groups, um, they're telling us that they want 0:22:36.200 --> 0:22:41.160 the administration to really um consider what ramifications the policy 0:22:41.240 --> 0:22:44.959 changes would have on businesses as well as the foreign 0:22:44.960 --> 0:22:47.679 born workers. Well, I wonder if you could get the 0:22:47.680 --> 0:22:50.480 details for us in terms of the companies affected, Tyson, 0:22:50.920 --> 0:22:58.960 for example, Cargil, j B S. Are they all exposed equally. Well, 0:22:58.960 --> 0:23:01.120 you know, one area that we looked at was Fort 0:23:01.160 --> 0:23:05.080 Morgan in Colorado, where Cargill has a large beef plant, 0:23:05.200 --> 0:23:07.800 and that is an area where UM, there are a 0:23:07.800 --> 0:23:11.240